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Isn't it considered suicide to enter the handheld business against Nintendo? It may have only half the sales of the DS, but the PSP came out a year later and was more expensive.
I'd say the PSP is definately a success- it's like the first Xbox; didn't sell like crazy, but was used to establish themselves in the market, meaning the PSP2 will be a far bigger success. Sony are probably pleased with it, they've put up a good fight against Nintendo for handheld dominance.