I figure Mircosoft wants to wait until probably August or Sept for a few reasons:
A) Don't think a cut will increase PS3 sales much as it still lacks killer apps
B) A price cut now would be forgotten about by the holiday season, but one done late in the year, coupled with GTAIV/Halo3 would give them tremendous momentum going into the holidays
C) They'll have the Falcon 65nm version out by then which is cheaper to produce

If Sony dropped the price in Europe, then MS would be forced to meet it or lose that region.

The problem is that many gamers who have not yet made a decision to purchase a next gen system see the Elite and 60 Gig PS3 as essentially price equivalent. Once a person buys one or the other, they are more than likely done. Very few will buy both. If sony picks up 20% on the price drop at the expense of, say, a 20% price drop on the MS side. That's a 40% delta... The 360 is actually MORE expensive since you still have to buy a wireless solution unless you have a direct connection close to your Xbox. I think it was a critical mistake to not have a price cut contingency in place to immediately answer with their own price cut should Sony have done it (and they did). Microsoft was in a position here just recently to slam the door on the PS3 by cutting their price. The massive hardware failures and costs appear to be what kept them from doing so and if they don't do something very, very soon, their opportunity to "put this one away" will be gone.

I somehow think not responding with a price cut might be some ego thing. Microsoft doesn't want to act like Sony is forcing their hand. The fact is though the 360 has gone longer than any system I can remember without having it's first price cut. I expect when June sales come out they will even be worse than the mediocre 150k they sold in May. It's saturating at that $400 price. I expect the PS3 will sell better than the 360 in July, due to the price cut and the 360's downward trend. After than they'll probably respond with a price cut I suppose.

I think there are a few things that are preventing Microsoft from dropping the price of the XBox 360 at the moment:

1. They expected the XBox 360 Elite to become a popular product and are (probably) disapointed with sales. It is possible that Microsoft produced this model with the expectation of 'reducing' the price of the XBox 360 while maintaining the price level ($250 Core, $400 Elite, and Priemium discontinued) and slow sales for the model make them question this strategy.
2. XBox 360 failure rate could be causing Microsoft to hesitate about reducing the price of the XBox 360 at the moment. There are (at least) 1.5 to 3 Million XBox 360 systems that were produced with the design flaw which causes a lot of systems to fail. Microsoft would (probably) want to destroy or quitely fix these systems prior to reducing the price of the system.
3. The price of the PS3 was just reduced and Microsoft may want to see what impact that had on long term sales prior to reducing the price themself. Next week the internet will explode as PS3 fanboys get all excited about the weekly sales numbers for the PS3 (probably in the 50,000 to 100,000 range and potentially passing the Wii's weekly numbers) but these numbers will not be meaningful; Microsoft probably wants to see whether the PS3 begins outselling the XBox 360 in North America before they implement a price cut.

A few ideas:

#1. With it being known that Falcon is almost in production, I wouldn't anticipate a drop until it's actually in production. If 65nm + the hardware redesigns come at a significant drop in actual price to manufacture, MS will certainly either wait for this, or just before, to clear out old stock. MS doesn't want to keep making costlier, less reliable hardware where the cheaper, better solution is around the corner.

#2. MS knew that right now, all they'd probably do is a $50 price drop. I have this feeling that MS is waiting for Falcon, and other things (H3, GTAIV, ect) to give us a major drop that'd put the 360 core underneath the Wii's price, and put the Prem just above it. I have this silly, little feeling that MS might even go as far as $200 for Core, $280 for Prem and $399 for Elite. If Prems were $280, MS would really give the PS3 a killshot, and suddenly become the king of the world.

#3. With 1b in losses, I assume MS wants a little bit more cash back. 1 more month wouldn't hurt them in the long run to wait for a drop (or even 2).

Also, the big thing is: With the H3 360 having HDMI, I question: will all new X360s have HDMI now? Certainly it's not like the H3 edition really should or would feature exclusive components that no other system can get (aside from the overpriced elite).

Again, Im sad that MS didn't lower the price, but I've advocated a reduction in price since November last year for Gears of War....So this isn't news to me.

If the 360 doesn't get a price drop or there aren't any great deals (ala the $100 + $100 rebate of last year) around Christmas time, I'm more likely to buy a PS3 than a 360 due to the quality issues. There are just a couple of games I want on the 360 right now, so the consoles may be a horse-a-piece for me around the holiday time. And if I'm looking at $400 vs $500, I'll buy the decent quality product.

A price drop right now would be a bad idea for MS for a few reasons:

1) They need to see what happens with the PS3 price drop and react accordingly. You can debate how truly important this is.
2) It would seem like a knee-jerk reaction to Sony's price drop a few days earlier instead of offering a better value to customers. They'll also get more press with a later price drop further away from E3.
3) They want to place the price drop as close as possible to Halo and the release of the Falcon console. That way they'll build up even more press momentum (H3+360 Pro for around $360, nice) and they'll lose less money trying to move their current (and expensive) stock at regular price.

MS doesn't need a price drop for now.......

totally aggree...and i'd add:

1) Xbox 360 is selling bad right now: FACT

2) PS3 right now is selling less than X360: FACT

3) Xbox installed base is roughly 3 times PS3's: FACT

4) Sony needed a price drop, MS can wait at least till the holiday season: FACT

do you ( i mean Sony Fanboys, not the user Gamerace of course ) expect Ps3 starting to sell 200k console per week?...PS3 at best could gain a lead of 30-40k consoles per week (more than what a Sony fanboy could even hope) and this without considering that in september the Heavyweight (Halo 3) enter the Arena (again: remember i'm thinking like a fanboy)...ok, even in a scenario like this (worst case scenario) MS definitely can take 15 weeks and see what PS3 manages to do in the mean time before considering a price drop: right now there are still 6.5 millions more X360 than Ps3...it's a long way to reduce this and 15 weeks (till the last week of October) won't kill MS (FACT) and reducing price before holiday season is surely a better move than doing it during summer (again: FACT).

in other words: Sony, given the actual scenario, could't choose when to do the price drop and was forced to place it in the worst season of the year (18-20k consoles per week is really bad: you MUST do something)...MS can choose. period.

"Does Microsoft think Sony is a joke? "

Well, they certainly aren't laughing WITH them. jk


I think the price drop will depend on the sales of the PS3, if they start taking off, MS will go ahead and drop the hammer, if not, they'll make a killing off Halo and GTA and then drop it.