Regarding the gaming division I think just about everyone in this thread has gotten it completely wrong. Everyone is blaming research and development, or the poor hardware sales of the Vita, but those don't adequately address the poor results. They are truly marginal players in the scheme of things. Research and Development is a persistent cost, and its effect should be fairly diluted by being spread across many quarters. While the Vita is effectively a small product line that probably sees small scale production. The fact that Sony continually cuts forecasts for the hardware tells us that they probably have curtailed their own production severely, and they don't have a mountain of unsold units in a warehouse anywhere locking up capitol.
The culprit is more then likely the software. Their own first party, and a decrease in the royalties paid out by third parties. This is actually a pretty straight forward conclusions. Sony's own software lets face it didn't fair too well in that three month period, and we know that the market is down overall. Given the companies profit margins on the hardware which isn't spectacular, and no I am not saying it is awful. It stands to reason that most of their green comes off of the software. In this case Sony likely spent more on software then the return justified.
That said the situation is probably fairly neutral. Obviously releasing games that garner a lukewarm reception from consumers isn't a ideal situation. It is a situation that can be rectified in future quarters through the release of games that consumers may respond more favorably to. Perhaps more importantly the focus should probably be on the console rather then on the Vita, and yeah it kind of needs to be said. The Vita isn't doing poorly. The device is effectively drawing dead, and if Sony doesn't kill it the market will do the job for them.
The Vita has moved beyond poor retail space allotment, and is actually disappearing from a number of retail locations altogether. This is going to continue to exacerbate the sales problem. Drive down third party development, and dash any chance of a real price cut, because high volume production that could drive the costs down just can't get any momentum. I honestly don't think that Sony is blind to this, and they have probably already written off the device. I am not saying the device itself is the problem, but the money being spent on games for it probably is a part of the problem.
That said I wasn't particularly shocked by the announcement. Consumer sentiment took a pretty hard hit last quarter, because of the political brinksmanship that took place in the United States. It directly impacted the sales of high end goods, and that is where Sony was most vulnerable, and they like most analysts probably expected a healthier holiday season then what we actually got. So it stands to reason that they probably over produced for a demand that didn't materialize. I can most definitely see stuffing in the channel in excess of the norm.
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