From: http://biz.gamedaily.com/industry/feature/?id=16743

"With the first PS3 price cut already announced, the industry turns to Microsoft, waiting for them to respond in kind. Michael Pachter thinks a response is coming this week, with a reduction on the prices of all the various 360 models. The internal hardware might be changing on these units soon too, according to Dean Takahashi." 

Ok, before I state my oppinion. Yes, I work for Microsoft but have nothing to do with the Xbox360 team and nor do I have any special insight into the topic. Yes, details of strategies are kept secret even internally to reduce the risk of a leak. But there are a few obvious thing as a fellow gamer, and someone who has been following the industry can say. Probably the best way is to summarize my POV with a set of bullet points.

  • The Xbox360 is still significantly outselling the PS3 in most market. In fact, the PS3 sales appear to be much weaker than they would hope for and they therefore likely have an overstock problem right now.
  • In terms of video game console sales, mid-summer is probably the weakest time of they year. Announcing a price cut at this point is somewhat stupid, any buzz generated will have fizzled out way before the holiday sales peak season. So in other words, if a price cut generates a 20% sales boost for a few months, they are shooting themselfs in the foot by doing so in the slowest sales period of the year. Almost seems like a sign of desperation to me.
  • Ok, they announced the price cut before E3... Now what? Seems like that would be the "big announcement of the show". Unless they have something else under their sleeve.
  • Oh, and despite the price cut, the cost of a PS3 is still insane. Plus their selection of game is still poor almost one year after launch.

Now, will the Xbox360 cut their prices? Beats me... I do know that as with any piece of hardware, the costs of production have been reduced since the release so this obviously makes the possibility of a price cut a possibity. But I doubt any such announcement, if is to occur will happen at E3. It's just a poor strategic choice in terms of timing. My guess is that if such a decision is made, it would be announced later this year before the holiday season where the "bang for the buck" of such an announcement would make more sense.

Plus, if the 360 is leading the road in terms of sales, attach rate, .... Why is there such an "urgency" that Microsoft needs to respond?

Anyways. Just my 2 cents....