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Even if it's $400 in production costs -- which is just an estimate -- that's not even close to breaking even. There's still shipping, distribution, marketing costs (the massive flood of PS3 ads on TV aren't free you know), and they don't sell it to retailers for $399 either (though it is close to that).

Considering Sony themselves said the PS3 as a whole (hardware + software) wouldn't be profitable until at least the middle of this year, I'd take this with a grain of salt.