A realistic assessment of Sony's situation:

1. They are hurting. Companies, especially Japaneese, do not go and trim 16,000 people from the workforce unlesss in dire straight.

2. They are not pulling out of Gaming. They are looking at ways to make the Playstation brand stronger: i.e. go for increased sales, not reduced costs.

3. That said - forget about any price cut any time soon. $100 cut means $1B in lost revenue. They just cannot afford it.

4. As long as Sony thinks that the PS3 is going to turn profitable in the short term then they'll leave it untouched. But if it does not seem to break even soon then they'll take more drastic measures.

5. Forget about any past sentiments and the past success of the PS2 and PS1. It had been many years since Sony saw a profit from the gaming division. That business is not immuned to cuts and even more drastic measures.

I'm just going to come out and say it. Flame me if you must. The PS3 should be abandoned. It was lossing them money even before the currency became an issue.

I do not forsee them abandoning the PS brand or gaming though. There's still good money in that. The PS2 and PSP should both continue as should all their PS3/PC games (but also be ported (sorry Sony fans)) to the 360.

But the hardware itself is an albatrous. It, in and of itself, will never earn them money. Due to the current economic realities they should cease production by the end of fiscal if not before. Then bring about a PS4 in late '09 or '10 following a Nintendo-like business model (IE: not selling high-end hardware at a loss). They have at this point sold enough hardware that no 3rd party would or ever will take a loss for making PS3 games so there won't be any negative backlash from them like Sega got.

I know. Makes me sad too.

So what would they do with their current stock? Fire sale?

I'm sure they'd like to do that if possible, but would people trust Sony's next platform after seeing the PS3 abandoned after less than 3 years?

If Sony is to continue in the gaming market they just have to eat up the PS3 losses and get a good strategy for the next generation. Anything else is probably worse than just getting out of gaming hardware altogether.

Last time I checked, Sony Ericsson sold over 100 million phones over the world in 2007, I don't understand why everyone is killing them.

I'd prefer them leaving the Playstation than Sony Ericsson, their phones are among the best, most reliable and affordable.

@gamerace

Abandoning the PS3 is last thing any gamer should want to see. There are great games on the PS3 and this adds competition which increases the overall quality and health of the gaming industry. We should be happy that the quality and quantity of the games do not depend on Sony's balance sheet (hopefully).

And by the way, abandoning PS3 and releasing PS4 in a years time - all I can do to that is sigh.

Looking at this from a gaming perspective...

As I said before, hardware is not going to be a leap from last gen as everyone expects. The business model that Nintendo adopted is a sounded template that I think you will see SONY and Microsoft follow.

...Guess there's nothing wrong with two [insert console here] duct taped together huh if it still has good games?

sidenote: Next gen is also why I want MS to improve their 1st party, as I believe it will be the deciding factor. If they don't improve it you will have Sony and Nintendo battling with Nintendo a slight edge on 1st party.

... I wouldn't mine seeing a more even playing field next gen for all 3 companies. =p

Canceling the PS3 would screw every company developing product for it.  It would be billions of dollars lost, and it would suggest that Sony would abandon their hardware if they make too many mistakes.  That would deter people from developing on Sony platforms in the future.

Abandoning the PS3 would cost more than a few billion dollars in lost profits over the next couple of decades.  You are taking a far too short-sighted strategy.  Sony does make money on hardware for all consoles prior to the PS3.  They just don't make it in the first year -- after that, it is all gravy.

The PS3 has been a huge loss for them and a huge cost.  It has cost them nearly 10 years of profits from the PS2 and it is still losing money.  However, it is still worth while keeping the playstation brand a Sony hardware product so that Sony can collect revenue in the future from it.

Next generation both Sony and Microsoft will be looking to make money.  The strong suspicion is that they'll release products not quite as high end as the 360/PS3 were when they were released, because putting out hardware that expensive is too risky.  Sony will probably outsource much of their R&D to companies who are better at those things, and they will probably buy commodity hardware, especially the CPUs, for the next system. 

There's no way they'd do another cell fiasco.  All of that cost for so little benefit.

Quantity <> Profits

The division loses money. Their products have a low profit margin and that margin has been shrinking. In the business world, shrinking profits and losing money is failure.