The thing that still shocks me, though, is the degree to which they blew their market leading position in portable music players. They OWNED that market in the 80s and 90s with the then-ubiquitous Walkman brand, which they extended into the CD era with "Discman" players that seemingly everyone had when I went to college in 1988.
Internal politics (I assume?) kept them from introducing a reasonable MP3 player until far, far too late for them to catch up. Some of their early efforts literally required you to re-encode your music into another weird format to use (ATRAC, I think?) -- and this while smaller players (Rio, etc) had devices you could load by copying MP3s to a memory card. I assume this is because Sony Music was afraid of the Mp3 revolution, but my understanding is that Sony Electronics has always been far more profitable than Sony Music, so it's hard to understand how that tail ended up wagging that particular dog.
(Oh, and there's also Sony's bizarre insistence on proprietary formats, like MiniDISC and MemoryStick -- that didn't help them, either.)
And then, of course, Apple came in with the iPod and gathered up the high-end, high-margin customers that were Sony's constituency.