Hours after announcing that they are giving away 35,000 PS3 consoles in an effort to boost sales Sony has filed a loss of $3.9 billion for the Playstation 3.

The massive losses were disclosed in a in a new filing with the U.S. Securities and Exchange Commission. To date the PS3 has sold 12.9 million units worldwide. In Australia Sony Computer Entetainment sold around 240,000 PS3 units in 2007.

The current 40GB console which is being given away free as part of a major Bravia TV promotion sells for $699. The 80GB console is among the most expensive in the world at $999.

The losses do not bode well for Sony who during the past 18 months have seen Nintendo tear market share away. Now the Company is fighting Microsoft for the runner-up position behind Nintendo. The loss of market share also means Sony has lost its dominance of exclusive games, which puts the PS3 in a much worse position for the long term than the PS2 enjoyed. Currently Microsoft has been losing around $1 billion a year on their Xbox.

Sony is struggling, financially, while Microsoft increased its profits by 7% to US$3.05 billion. The Sony PS3 hardware includes a Blu-ray disc drive to playback high-definition titles, has been trounced in the market by the more affordable Wii from Nintendo. also hurting Sony is the launch of software such as Wii Fit. Sony is betting on top titles, including Metal Gear Solid 4, LittleBigPlanet, and Resistance 2 to reverse its PS3 fortunes in 2008.