Coming from a Polygon interview with multiple Square-Enix/Squaresoft devs...
Hiroshi Kawai, Character programmer, Square Japan - I’ll say this. I’m impressed with what Nintendo [was] able to do with the 64 hardware. Mario, Zelda — their devs must be top notch to be able to do that. But that’s essentially the extent of what you can do with the hardware. And you would get nowhere near anything like a Final Fantasy running on it.
Hironobu Sakaguchi - When we made our decision, the president of Square [Masafumi Miyamoto], our lead programmer [Ken Narita] and I went to a meeting with Yamauchi-san. There is an old cultural tradition where, in Kyoto, someone will welcome you with tea, but you’re not supposed to really drink that tea. It’s just polite to have it there. And Yamauchi-san welcomed us with a very expensive bento meal and beer, and gave us a very nice welcome and basically patted us on the back to say, “I wish you the best.” No bitter feelings or anything.
Hiroshi Kawai, Character programmer, Square Japan - I think [Sakaguchi] is just trying to be politically correct with that one.
Yoshihiro Maruyama, Executive vice president, Square U.S. - I don’t think [anyone from Nintendo gave us a hard time]. They said, “Oh, we don’t need that.” That’s what they said. [Laughs] Their philosophy has always been that Nintendo hardware is for their games, and if a publisher wants to publish, “OK you can do it.” But if you don’t like it, “We don’t want you.”
Hiroshi Kawai, Character programmer, Square Japan - What I heard was Nintendo said, “If you’re leaving us, never come back.”