If the price cut is for real, then Microsoft is in deep, deep trouble, because Sony is going for the jugular. 399EUR/US$399 is a mass market price, the equivalent of $299 in 2000 dollars, and the PS2 didn't exactly collect dust on shelves in 2000. It's only $50 more than the 360, erasing the latter's price advantage.
But won't Sony bleed money like crazy? Nope.
A big part of the cost of the PS3 (maybe $120) was the Bluray diode, and that's gotten vastly cheaper - it's probably not more than $20 today. The EE chip will be removed, that's another $27 saved. Electronic components fall 30% a year, so the original $800 manufacturing cost of the PS3 (this is iSupply's estimate, not mine) should be down to $460 at most.
They won't be losing big bucks at this price. Remember, many shoppers will be buying the $499 high-end 80GB systems, and 399EUR equals US$559, 1 EUR = 1.4 dollars. Small loss in US + small profit in Europe = breakeven.
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