= I will not be getting a PS3 anytime soon

Then how come they discontinued the 80GB one? They did discontinue it, didn't they?

 True.  But this time they came up with a legimate reason.  One that I believe they will actually stick with longer than some of the other flip-flops they have done.

 They may plan on releasing another model at a later point or the 40gb is cheaper to make and they lose less with it then the 80gb model.

they were able to reduce the production cost of the ps3 to ~$400 last fall, I doubt they were unable to lower any further in the months since. So they are probably making smaller profits on the cheap version and more on the expensive version and, like other have said, there is no need to go back to making no money or a small loss when sales are going good right now.

They should cut the price when GTA 4 comes out, or MGS 4 :P

I acutally dont think we will see a price cut for either console until GTA is released. Sony is enjoying good sales, and Microsoft, even if they cut price, would see a moderate boost without any big games and Sony will just follow suit.

Its best for both companies to just keep making more money for the time being, and cut price in combination with new bundles/AAA software.

Like many posters have pointed out Sony will most likely hold back until Microsoft makes a move unless sales fall drastically. Sony seems to have gained significant momentum and at this point they have to weigh up gaining further momentum via a price cut vs losing more money per console.