I think there is absolutely good reason to cut the price. The fact that Xbox One and WiiU haven't been as successful as the $399 PS4 doesn't mean that it's a good idea to ride launch MSRP too far. Losing momentum and failing to greatly expand the sales base (as well as ceding a certain % of customers to the cheaper X1, a number impossible to quantify fully, but also impossible to completely deny) are not things worth risking.

$349 reinvigorates the PS4's momentum, and sales should be higher by enough of a % vs. staying at $399 that the difference in the initial console sales revenue would more than be made up for in PSN, Game, and Accessory sales within the first year.

It's not always about merely beating competitors, it's much more important to have a successful product for the long term.

If a $349 PS4 is more profitable over the next year than a $399 PS4 (quantifying the deeper sales that each PS4 in the wild generates) due to higher sales trajectory, then that makes perfect sense.