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TWRoO said:
As far as i can remember, PSP hardware alone makes some [read small amount] of profit, so i'm sure adding software on top must make more profit.
Of course it isn't significant enough to negate PS3 loss, but then even PS2 is clearly not doing that either.

Exactly.  PSP hardware is sold at a profit (The slim even moreso than the fat actually).  It is making money.  Just as the PS2 is making money.  The problem is the PS3 loses so much that the PSP and PS2 are not capable of offsetting that.  Just think of how much worse it would be without them though.  

and yes, I'm busting balls on both sides of this argument, as I seem to be the only one here who owns both...