It seems that during 2007, Microsoft decided to focus on profitability on their second console, having done a small price cut in both Europe and America. What do you think Microsoft's plans are regarding price cuts in 2008?

either a minor price cut (50 bucks ) in spring and good chance of holidays of 08, or a major price cut this spring from GTA sales.

They will sell the low end X360 for $179.99

and the High end for $299.99

Thats my expectation(this is when they see sony is trying to make a comeback and is starting to steal some american sales from xbox).

I think a lot of dust will settle after the holiday season. Microsoft and Sony will both see their systems settle into very slow sales for the first 6 months of the year, but I believe the PS3 will sell better and have more non-holiday momentum than the 360. If my feeling is correct, Microsoft will probably do another price cut later in the year in an effort to steal as many holiday sales as possible.

Microsoft is very focused on profitability because they've lost so much. As strong as Microsoft's financials are, they cannot simply throw money away. Their investors can become impatient and put pressure on the company to make their gaming division profitable or jettison it. Microsoft is trying to sell the concept of a 'turning point' to their investors, but Microsoft's problem is that they still don't understand the console market and if they can't hide the cost of Xbox 360 repairs, they're still losing a ton of money. MS needs to position themselves to make money from a console from the beginning or within the first year. Inevitably, something wrong will happen and their profits will be pushed back, but at least that way they'll have a reasonable chance of having a profitable generation.

If MS shows profitability for fiscal '08, it will be on paper only.

Very. Not a single hair on their head... oh... sorry.

They'll probably wait and see first. If the PS3 substantially outsells the 360 for more than a few weeks, then they're probably going to cut prices by 50 or 100. The PS3 only started doing well after two 100 price cuts, so I imagine they're pretty optimistic about their chances to sell more in 2008.

I see MS doing a $100 price cut in Europe in an attempt to kill Sony momentum.

They're going to have to be VERY bold if they want to keep up this year's sales numbers.

I know they will have an xbox 360 at $179.99 next year

They will have all 360's within or below the wii's price range. Even if it starts costing them money again.

Sony will respond with a $50 price cut, and nintendo with a $20. Microsoft wont go down they are too rich.