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Sharp is big in the components business, namely IC chips and LCD. Those are the technologies they spent the most effort on, and it's products from those areas that you see Sharp as having the most market share.
MD is definitely not such a big source of income for Sharp, it's just that if they didn't succeed in MD they would've had to shut down their entire audio division in the early 90s.
There's also been cost compression in MD portables: things that sold for $400US street price in 1997 is now more like $250. That's going to clip the profit margin a bit, if not more. Consider Sharp's LCD TV sets, where they've been able to charge a premium over other brands (like Sony usually does).
Also remember that Sharp no longer gets business from cloning their MD products for other audio makers. Kenwood, for instance, is in debt (of about 17 billion yen), and has announced they're either completely dumping home audio or totally cloning someone else's lineup. Companies who used to clone Sharp portables are choosing Sony components for their home MD equipments.