I know just in the middle of getting lectured by my land lord on the phone while I was typing so if it didnt come out clearly then apologies. hmm yeah sound s likely that Nintendo managed more seeing as they make there own games and probably the best ones. Sony see some of the profits for games on their console that are third party, wheras the N64 did not receive much third party support but they did the best they could with their own games. With more developers going multiplatform nintendo look in a really strong position with their array of characters and games

The PS2 and PSP are sold at a profit.  Therefore since Sony has lost a lot of money in their gaming division you can attribute all that loss.... and more losses to the PS3.  Since the PS2, PSP, and all software sold for the PS2,PSP and PS3 were generating revenue that was sucked up by the PS3s losses. (aside from any first party bombs.)

@TC: Hmm, if you loose 100$ per console, you won't make up the loss with more consoles sold; you'll make MORE of a loss with every console sold!
However, Sony will try to push the hardware with lower prices and bundles that cost them a lot in order to get a bigger install base so they can make up some loss with software.
The software is where the big money is, after all!

Well that's not completly true.  Products cost money to store in warehouses, and the more the PS3 piled up the more it was costing them money in warehousing costs.  They can't just stop making PS3s because they deals with the factories.  Also it's very costly to stop production and then restart it.

By selling the PS3 at a loss they are saving even more money in warehousing costs which are going to increase the loss you are taking on each unit anyway.  So why not cut the price and get them out of there now and try and build up some momentum instead of taking massive warehouse losses.

@TyePhoid,

Quite simply we know that it is the gaming division specifically that is causing Sony to lose money right now. Now looking at the gaming division there are currently three major products of interest.

Those major products are the PS3, PSP, and PS2. So of these products we are extremely confident that the PSP and PS2 are both profitable on hardware and software. This leaves the logical and very easy conclusion to be made that the large loss in money is from either PS3 hardware or software. Given the history of software and the apparent cost and production problems with the PS3 hardware I think it is beyond clear to see that the PS3 hardware is the source of these losses.

Hopefully that should put your questions of "how do we know" to rest.

Now as for how they are doing as a company, I will say that anyone who tries to insist that they are broke is deluding themselves. Sony has quite a bit of money still, the problem however is that they are having a hard time justifying the continued spending on loss leader strategies for the PS3 when it is the only source of significant losses for the company. Stock Holders and directors can tolerate this for 2 or 3 quarters but realizing that the high cost to develop the PS3 was being felt far before the console was released you can see how this has been a constant for the company for probably 2 to 3 years now.

I will reiterate myself once again, they are not going out of business. Its not going to happen. But it is possible that they decide to stop with their loss leader strategy and take up a damage control strategy and attempt to salvage face and hopefully recoup some or all of their investment. In short, I think it would be naive to think that Sony is not displeased with the PS3's performance and it would be extremely naive to believe that they haven't put together contingency plans to stop the bleeding when/if necessary.

Finally, some folks are going to screech at the thought of this post, but the fact is that they are likely unable to distinguish the difference between someone saying the console is bad in a business sense and saying it is bad in a recreational sense. I am only saying that the PS3 is bad in the business sense.

If Sony was going to play defensively on the PS3 (giving up on market dominance in return for not taking massive financial damage) it wouldn't have done the $100 price drop.

If microsoft never made the XBOX

Sony= Microsoft financially at this point.

This would be true if you could make a good argument for the company having a single clear and cohesive vision for the product.  In reality it is very likely that they are quite split internally on how to handle the situation and the aggressive position is prevailing at the moment.  It very well could continue to prevail, but there is a real possibility that investors flex their muscle and say "enough!".  I don't know how close they are but it is a possibility none the less.

Not even close. Microsoft is in another league of mega-corporations, up there with General Electric and the like.

No, Microsoft is best compared to only the oil companies and Walmart.