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Sony's PS2 is outselling Microsoft's 360.

For Sony there has been a choice: a price cut for PS3 would not only mean more of a loss per PS3 (due largely to the strong yen vs foreign currencies at this point), but it would mean that PS2 sales would probably drop.  They'd be pulling profitable PS2 sales over to the unprofitable PS3 hardware.  But now, especially with the slim, I think the price of PS3 hardware has dropped enough to justify a price move.  This in the face of the strong yen.