Sony made a large number of blunders with the PS3 in my estimation.
1: They absolutely insisted that it have a Blu-Ray drive at launch. This caused several delays and jacked the price up significantly.
2: Sony has gotten a bit too complacent and cocky from its runaway success with the PlayStation 2. Top Sony executives were repeatedly sticking their foot in their mouths with some of the comments they made to the press. Sony has stopped listening to its customers, and decided it knows what they want better than they do.
3: It's too damned expensive. Sure, when you consider that for about $600 you're getting a Blu-Ray movie player, a rather powerful game console, it's really a bargain. But most people just see that $600 price tag, and cringe.
4: This is common for any new console, but there are very few games for the PS3, and even fewer that aren't also released for the Xbox 360 and/or Nintendo Wii. It's hard to convince someone to buy this $600 game console when there's maybe a half dozen games for it, none of which are really all that more compelling than the last batch of PS2 titles.
5: Both Microsoft and Sony seem to think that bigger is always better. They both invested huge amounts of money into building incredibly powerful game consoles, which really are just faster versions of their predecessors. Nintendo gives only a modest boost in performance over the GameCube to the Wii, and focuses more on a new innovative way of playing games. Instead of working on having eye popping graphics, usually to the detriment of everything else like gameplay, they focused on trying to make a system with games that are fun to play.
6: No Final Fantasy XIII yet. This has been one of Sony's major blockbuster titles since the original PlayStation. I firmly believe that when Final Fantasy XIII ships, PS3 units will start flying off shelves. However, it now looks as if FFXIII is going to be pushed back until around the middle of next year, maybe later.
7: Also in the spirit of dumb moves, Sony decided to remove the primary PS2 processor from the PS3 for the European units. This means that all PS2 backwards compatibility has to be done in software, and will be significantly less reliable. They claimed it was a cost cutting measure, but I don't buy it. They're still going to be making PS2 units until around 2010, so the marginal cost for producing enough for PS2 units and also PS3 units would be pretty minimal. Not to mention having to pay developers to code a PS2 emulator for the PS3. At least at this point in time, I don't buy their reason, especially given that Europeans end up paying about 15% more than everyone else. This has irked off a great many in the European market.
8: Stiff competition from Microsoft. Sony and Microsoft are both really targeting the same market segment of hardcore gamers, which is a fairly niche market to begin with. It's a very lucrative one, but there's probably only a few million such people the world over. How do you convince your average Joe to plunk down $600 for a game console they may only use a couple times a week?
I'm sure there are plenty of other reasons, I'd just count those as the big ones. I also know what I'd do if I were Sony to help turn things around, but I highly doubt they'd be interested in anything I have to say, which is part of the problem. And it's not because I'm some wise and learned business oracle that they should be interested in what I have to say, but because I'm a potential customer.
Anyway, sorry to write a book for a simple question. That'll teach you to be more careful about asking people open ended questions. 