Wow. You rarely see any company being that frank. It's like Sony is saying:
Look, we've lost this generation. We're not going to keep cutting prices, etc. in a desperate bid to beat Wii. Instead we're going to focus on making a profit and try to recoop as much as we can (and expect MS to do the same).
I think Sony and MS are both in the same boat. They can't beat Wii. They can try to beat each other but if they do, they'll both lose profitablity. Or they can both hold the course, keep prices as they are (Nintendo certainly isn't about to reduce theirs either) and focus on making money instead.
MS is making a profit (sorta they lumped 3 years worth of RRoD costs all into one quarter instead of spreading it out) but I'm sure they'd like to recover costs too. And between xbox & 360 they are closer to 6 billion in the hole there. So don't expect any 360 cost cutting until the holidays at best.