As reported in this Reuters article, an analyst at Mitsubishi UFJ Securities said, "The battery recall costs were within expectations, but the revision highlights the troubles of its game unit."
One reason for the troubles in the game segment is slower than expected sales of the PSP. Sony had predicted it would ship 12 million PSPs by the end of its fiscal year in March. They revised that target to 9 million, a 25% reduction. Ouch!
Another reason for the game segment woes is obviously the variety of problems with the PS3. From a European launch delay, to manufacturing problems, to cutting the price in Japan, Sony is simply not going to recover as many costs as it had hoped.
Adding insult to injury, the financials did not factor in possible legal action from manufacturers of laptops who the defective battery. Super ouch!