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I think M$ is in a losing situation here

They could match the specs of PS4 and launch at the same price as PS4 but it will get outsold hard by the PS4

or they could just roll with the weaker and cheaper console and mainly focus on Kinect like the rumors suggested so they could stay on par with the sales

They might even try to outdue the PS4 while launching at a higher price

 

Edit: I think they will keep Kinect as their main focus