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They'll both be dropped around that time, Sony will be willing to loose more money for more consoles, but also MGS should be coming out around then, so they will get more MGS sales, making it less likely to go to 360. As usual, more PS3s sold will eventually lead to a profit.
as for M$ they will want to capitalize on GTA IV, and get the most out of it, and they have plenty of space for a price drop, although they cannot really undercut the PS3 as they would have hoped, because they will not drop the elite to less than $300