Everyone is trying to figure out what the heck is Sony doing with that PS3 of theirs and when exactly are gamers going to see a substantial price cut in order to get it moving. Who else better to answer that question if not Wedbush Morgan analyst Michael Pachter? He believes that Sony will indeed lower the price of the 80GB PlayStation 3 to $499, once the set-to-be discontinued 60GB PS3 is off retailers' shelves.

"In our view, the Sony entry level price of USD 499 is here to stay," said Pachter in his latest report, according to Next-gen.biz. "We believe that there are presently 2 - 3 million 60GB PS3s produced and not yet sold, and expect the entire supply to be diverted to the US to honor the new lower price point. Once these units are sold through, we expect the company to lower the price of its 80GB model to USD 499 on a standalone basis."

And the price drops won't stop here, as Pachter reckons. According to his forecasts, the fact that the 80GB PS3 doesn't sport the emulator hardware (which is expensive), Pachter says that production costs could indeed be lowered, giving Sony the opportunity to lower the machine's price again in early 2008: "We expect the USD 499 price cut to be maintained until early next year, when the 80GB model will likely be cut again to USD 399," he said.

But Pachter's forecasts concern Microsoft as well. He believes that the company decided not to announce a price cut for the Xbox 360, for fear that people might connect it to the machine's well known failure rate.

"The company did not cut the price of its Xbox 360 despite our speculation that Microsoft would feel compelled to do so after Sony's price cut. It appears to us that the company is trying to deal effectively with its warranty issues, and was concerned that a price cut so soon after the announcement might send an unintended signal that discounts were required to move hardware."

He is confident that a price cut for Microsoft's system is still "appropriate" and that fans will most likely see one by the end of 2007.