Everyone seems to forget them 360 was out a whole year before the PS3, the first year that it was out it sold 5.2 million units compared with 0 PS3s. So in fact they aren't in 3rd place because their are in different times in their lifespans.
The continued price cuts, (whether fire sales or discontinued SKUs), by the 360 will leave them with an "inferior" market perception about their product. Yes people will buy it at the beginning of its price cut, but after that you are left with a market perspective of inferiority.
You can not compete on price alone, which Microsoft should have realized already. The Wii has an overlapping target market that does not compete on price, (it hasn't had a price cut). So you can't use the Wii's success as plan to sell more 360, you think Microsoft executives would know this.
Fact: Earthbound is the greatest game ever made
