Earlier this week we reported that the UMD Movie format was on its last legs , and wondered curiously why Sony's
Connect service had yet to integrate increased PSP support as promised, but
little did we know how great an impact these seemingly minor issues would
actually have on the PSP itself. In a shocking announcement last night, Sony
Computer Entertainment head, Ken Kutargai revealed that the company is currently suspending production of the PSP:

" It's no secret that we have been selling the PlayStation Portable at
a significant loss. Part of our decision to sell the system at such a low price
point was predicated by our analysts' prediction that the UMD format would be
successful not only as a way of distributing movies, but music as well. Initial
consumer reaction to the format was strong, but for reasons we are unsure of,
consumer and then studio support began to quickly drop. Since we planned to
recoup part of our losses on the system by UMD licensing, this has left not only
Sony Computer Entertainment in a difficult position, but the entire Sony
Corporation as well. We cannot continue to sustain these losses, and I regret to
announce that we will be suspending production of the PlayStation Portable
indefinitely. We will continue to evaluate the system's viability, hopefully
resuming production when it makes sense from a business standpoint. We will
continue to support the PSP by continuing to release quality titles, and we
encourage our third-party partners to do so as well."

Shocking. There's simply no other way to describe the bombshell announcement,
which came mere minutes after Sony's fiscal year end. Scrambling to make some
sense of the announcement, many analysts feel the move is partially due to the
PlayStation 3. "Sony is going to be taking a huge financial hit on every
PlayStation 3 sold, and there's no way they can take losses on two systems at
once. If you follow Japanese software sales at all, you'll see that PSP titles
are rarely in the top ten, and since this is how Sony makes their money, it
means the company is nowhere close to breaking even on the system" said Gabe
Logan, an analyst for SF Corp . "Couple these issues with the tremendous response of Japanese
consumers to the recently redesigned Nintendo DS, and the announcement isn't all
that surprising."

Since Sony dropped this bombshell at 12:01 a.m. on April 1st, we were unable
to get a comment from anyone at SCEA, but we will be sure to follow up on this
story at the start of business on Monday morning. Our forums will no doubt be
bombarded with discussions on the subject, so we've created a special area where you can speculate what's really behind this stunning
revelation
.

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