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I understand that they had trouble making a profit on the original system, but for me personally, I'd much rather buy a cheap last-gen system for my second console than an expensive 360 or PS3.

Indeed, since I have a new job I'm thinking of getting a PS2...Xbox could be on that list as well.

So, I don't think this was a huge mistake, but if they had found a way to drive down prices (replace the hard drive with flash memory?) maybe it would have made a little profit.