Ummmmm what do you think Sony's gonna be doing with the PS3? They'll be losing money on every unit as well. Sometimes that is what you have to do. Component costs aren't static either as larger orders are placed the price generally goes down. I don't expect Toshiba to make a profit but I do do expect that they'll ride out the losses until cheaper (BOM) 2nd gen units are ready early next year.
The "digging grave" stuff is hypebole. Toshiba isn't some johnny come lately. They can finance a loss for 6 months on HD DVD. Format wars are about licensing. Licensing media, asics you name it. There is a pot of gold at the end of the tunnel or Sony and Toshiba wouldn't be going through this.
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