They have to if they want to stay competitive.

Nothing new for Microsoft. At least it won't damage them really as a whole. If they really want to stay competitive, I think they would do what they need to do with a price drop.

At the same price, PS4 will win.

Microsoft has to drop it and lose more money.

Now this is a bold prediction, but I think instead Sony will drop the price of the PS4 to $300 this fall (Or next).  This is pre-empt MS' next price drop, and since the X1 costs more to make than the PS4 - Sony knows it will hurt them bad.

LOL no they don't.  they are outselling Xbox 2-3:1.  Unless the Xbox One becomes $200, Sony can keep its $400 price and continue to outsell the competition.

That's what I think to.  Holiday 2014 was MS' Battle of the Buldge - they threw everything they could at Sony.  They had a slightly better line up in a year with medicore third party games, and the X1 was essentially $250 with its insane bundles.

At this point hey just don't want to dig another money pit.  I will make a bold prediction and say X2 launches in LATE 2017.

It's not competing with the original Xbox, now is it?
It's competing with the PlayStation 4, and if Sony drops it's price, and Microsoft leaves it alone, with the lineup that Sony has set for the system for 2016, that ratio will jump from 1.75-2:1 now, to around 4-5:1 later.

Probably not this year since they have a strong lineup this holiday season to push sales in the U.S. They will want to ride out the $349 price for as long as they can, and they can add more value for the price if needed. Then maybe in March next year, they'll cut the price down to $299.

Not sure MS matching a price cut would be the best strategy. It's not going to help them gain any ground that an improved software line up wouldn't and would only result in being a loss per unit leader.

If the PS4 drops to $350, the best course is probably to offer excellent holiday bundles and hold off on any future price cuts until MS engineers can redesign a new model with a greatly reduced BoM to cancel out/reduce losses per unit.

I want to say that the current BoM per unit is likely around $300, but frankly, I stopped tracking these things once market percentages settled in on the 8th gen and I really don't have any vested interest in whether MS is currently making a profit, breaking even, or posting losses on each unit sold.

I believe so. If Sony dropped the PS4's price to $398(not a typo), MS will follow with a $75 price drop.