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Sony was just hoping that those 80 million people that bought the PSP would bite again and buy the Vita really. While Sony has solid first party offerings, I don't think it would be enough to push a HH all that well. Plus, the whole memory card issue and the fact the Vita isn't as easy to hack as the PSP were blows. And if we're considering Japan, Monster Hunter jumping ship to Nintendo was a huge blow.
Putting all of this together, it's no wonder the Vita fizzled out and Sony just decided to focus on the thing that's actually selling.