Are Sony Undermining The PS3?

[Alby_da_Wolf]

At $/€99 PS2 undermines other low-end consoles: not Wii, that was low price in the past, now it's mid range and never suffered competition, but XB360 Arcade.
If Sony manages to make people think XB360 Arcade is competing with PS2 instead of PS3 there is no painless move MS can make to counteract.