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The flip side is: If the device isn't selling enough to turn a profit, do you keep producing and selling it?
The masses are buying in the 150$ range, while it would be nice to keep around a niche device, if it wasn't something that sold enough to make a profit, I'd expect a right-minded business to kill that product. If Sony can't make a profit with the T1, then I'd be very surprised they'd even have a shot with a 7" model.
While I admit that Sony has stripped things down, they've also over-engineered those products and priced them out of the markets they are trying to compete in. At least the software side of things continues to evolve even as they have to gut parts of the hardware to make the price points that people are actually buying at.
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