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No, I think theoretically if this Sony & MS team did have like $10 billion+ to burn, they would compete pretty well with Nintendo. Especially considering they'd be able to drop the price to like, sub-$200.  Heck, with that kind of money they should have no problem dishing out like 40 million arcade units for free, lol...

Of course, the Wii would still overtake the thing once they run out of money.