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I see the PSP as the xbox of the handheld division of gaming, it is a way for Sony to get their foot in the door and then to expand! I wouldn't be surprised to see the next handheld race to be a lot closer in terms of hardware (much like the 360 is for MS)...

Then again Sony need to make sure the PSP2 is much much harder to hack/cheaper/better battery life/and of course, have a flood of software on it!

These are all lessons learnt from the 1st! :D