While a $399 PS3 is great for the consumer, it's terrible for Sony. A $399 price point in November means that next November, they'll have to offer it at $300, the following November, $200-250, etc. etc...
This ensures Sony will lose money for the entire generation. There's no way they can cut $100 in manufacturing out the PS3 with a smaller HDD (probably $5 or less), card slot removal (another $5-10), and the PS2 GPU (maybe $15). So that means Sony is willing to take an even LARGER hit on the PS3 than they already are taking on the 60GB/80GB models.
With the deep pockets in Redmond and the 360 nearing profitability on hardware (if it's not there already), Sony is playing a very dangerous game if they attempt to squeeze Microsoft's price structure like this.
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