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Alright, I think people are getting confused. Let me lay it out for you:

PSP: Sells great (relatively) in Japan, sells a decent amount of software. Sells horribly (relatively again) in Europe and America, and moves barely any software at all.

So the PSP's focus should be in Japan, but Sony should be focusing on the PS3 for the other regions. It may not be the best way to get back into the American market, but it's the best shot they have at this point.