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Mr Puggsly said:
After reading comments, I still think the PS3 could have got away with $499 and it would have put them in a financially better position.

Even $449 would still have gave them a good price edge on the X1. But $399 shows they were really concerned about MS.

Of course they were concerned about MS. I doubt they were concerned about Samsung, HTC, or Huawei, it wouldn't make any sense. You seem to imply it is a  bad thing. Though I doubt they are concerned as much right now.

With the price being as it is, they will steal a lot of customers from competition. Those customers will buy a lot of games. They will buy lots of PS+ subscriptions. That money lost will be recovered easily (and it wouldn't be 500milion, they would include the camera). It is not hard to see. 5 million extra customers with a game and 1 year PS+ plus purchase will bring in more than that.