No reason to question Sony's ability to ship 11 million units this year. Even if they have to stuff the channel, they'll get it done.

Agree but what is the purpose? Isn't it just throwing away good money for bad?

Doesn't sound like a very good business strategy. The best businesses are able to adapt quickly to market conditions, positive and negative.

 Microsoft did it, so Sony is allowed lol

It's not like those units won't end up selling eventually anyway, and the faster they can produce units, the faster they can create a decrease in production costs. Sony will also aim to ensure complete supply during the Christmas shopping season, something I'm not convinced Nintendo and to a lesser extent Microsoft can do. Businesses like Nintendo, who take 6 months to react (I think they finally reacted anyway)?

Nintendo's reaction was reasonably timely after it became clear that their shipments were inadequate; the Wii being sold out in November, December and January would have been somewhat "normal" for a popular console launch, it wouldn't have been until February or March when it became clear that they were undershipping.

Beyond that there are risks associated with shipping (dramatically) more units than you're selling ...

Assume (for a moment) that as of March 31st 2008 Sony has only sold 8.5 Million PS3 systems, this would mean that they would have 8.5 Million PS3 systems that were produced at a (reasonably) high price which were not sold; previous systems have stopped production when they have seen a surplus of units like this. Now, regardless of whether Sony is producing PS3 systems or not, many of the components will continue seeing cost reductions while Sony has to work through excess inventory. What this all means is that in December of 2009 Sony could be selling a PS3 system that cost $600 to manufacture when creating a new PS3 system might only cost $300; by overproducing the system early on Sony will either be forced to keep the price of the PS3 high or take a greater loss while selling their system.

Shipments have been inadequate for 7 months, but anyway, they should have known in January. Nothing's going to sit in a warehouse for 2.5 years. Sony's unlikely to look at historical costs or costs of inventory and instead look at what the current cost is. Either that or just act when Microsoft does.