You can have the best piece of hardware in the world, but without the best software in the world (or, to put it in less hyperbolic terms: the software that the mass market at large wants to buy) you're not going to sell it at any price. That goes for any company.
Obviously true, but the software of Vita's launch is just a typical launch lineup. It's I guess ok by launch standards, but other systems still manage to get away with it and do well with infinitely worse lineups.
No matter how good your lineup is, people don't want to pay $250 for a gaming dedicated handheld. They just don't.
3DS dropped to $169.99 and Nintendo had to bend Mario over the bedpost and whore him out like the dime corner prostitute he is to get the engines churning again. Shit, just wait until they get Pokemon Rehash Polka Dot edition. Sony just can't compete, and in Japan they also made the additional blunder of failing to nail down Monster Hunter. Franchise means shit in America, but at least Japan could have offset some losses if they made sure to secure it. Sony doesn't have Mario to whore and they definitely don't have a $169.99 handheld. The fact that Sony's handheld easily has the best integrated control set of any handheld ever made, the fact that Sony's handheld launch lineup literally molests its competitors at a similar point in time, the fact that it has the most flexible and dominate power set to create a far larger variety and quality of game, the fact that it has the first ever really competent online platform for a gaming dedicated handheld doesn't matter. It does everything right - except the price, because the market doesn't want to pay $249.99 for a gaming dedicated handheld.
Additionally because handheld markets have a larger portion directed to younger individuals, Sony's handheld is immediately as a disadvantage because as usual they're making a system for tech enthusiasts. Sure, it can make better kid games than 3DS could, but it's not the way it's set up and marketed. Sony continually miscalculates: you
do have to make certain judgments and tailors your games a certain way to get your handheld going. You do have to stereotype your audience.