Unfortunately, hardware losses are not the only expense that a console manufacturer faces ...
People forget how expensive marketing a console can be, in particular when you favour television ads like Sony does; a single 30 second spot on a national broadcast at prime time can be as much as $1 Million. In 2001 Nintendo spent $500 Million on marketing for the Gameboy Advance and Gamecube and I don't recall seeing ads for the Gamecube and GBA as much as I have seen PSP and PS3 ads.
The other consideration is game development costs. Sony has bragged many times that they have more developers than any other publisher in the world; when you combine this with games which cost a lot of money to make and are constantly delayed, the higher costs and lowere revenue can really put game development deep into the red.
