From Kotaku:

Pricing the PlayStation 3 below its production cost caused Sony to lose $2.16 billion in 2007 and $1.16 billion in 2008, the company revealed today.

Sony's fiscal 2008 annual report delineated potential risk factors to its investors, outlining that "the large-scale investment required during the development and introductory period of a new gaming platform may not be fully recovered." The loss figures were provided as an example of the "significant negative impact" introducing a new platform can cause at first.

"In the past, large-scale investment relating to capital expenditures and research and development for the manufacture of key components, including semiconductors supplied for [PlayStation 3] was also recorded within the Electronics segment," the company said.

In order to stay competitive, Sony said, it had to invest large amounts of money in research and development to introduce the PlayStation 3 into the market, and these sorts of expenditures don't always get recouped, especially if a platform "fail[s] to achieve such favorable market penetration... resulting in a significant negative impact on Sony's profitability."

Even if it can recoup its investment, Sony said, it's still possible to have lost large amounts of money on the platform's introductory period, and even a successful PS3 might take a while to replace what it cost to produce. These possible outcomes are currently a risk for the company, Sony said.

http://kotaku.com/5018899/sony-lost-331-billion-to-ps3-cost-pricing-imbalance

I'm sure they'll be okay.  I'd sure like to have that kind of money to burn, though :)

Sony being pretty blunt their. I honestly could see this year as having no price cut as profit seems to be the key for them right now. This would also line up with their strategy as stated by Lazard.

Yeah, it's pretty much a guarantee that there will be no price cuts this year. Even if MSFT cuts the 360 price a bit, it shouldn't be enough to stall the PS3's momentum.

Ouch. Pulling an Xbox 1 it seems.

This pretty much confirms no price drops for this year, the only exception being if the 360 drops, then Sony has to respond.

They should be glad if they finish this gen with those loses. Sony have made the worst business decisions I ever seen.

I doubt 360 will drop in price, especially mentioning MS's focus with the 360 right now is to turn a profit.

But your seeing the effects of PS3 and 360 lashing it out last year dropping price and new SKU's trying to get an advantage in the market to have it all in vein to the Wii and each other. Now with not much positive outcome to it they are seeing the side effects to it in 2008 with inabilities to drop price again. It helped Sony more than it did MS but it still put them both in a bad position to compete with the Wii. Not that it can't be done, but it seems that a lot of their moves in 2007 were rash.

Maybe adding blue ray wasnt such a good idea

They could make it up in blu-ray revenue in the long run, but it would seem the gaming division won't be making making it up.

@ like one guy said in the comments section-- its the effects of putting bleeding edge tech. and multiple HW revisions in one year, I think he hit the nail right there. That said it still boggles the mind why they removed BC from the 40GB sku when the 60 GB was selling better at the same price.