Sony seems to have successfully rained on Microsoft's parade. Rumours of a $100 price cut on Xbox in the US have been rife for weeks, and Microsoft was strongly tipped to make the announcement at the Electronic Entertainment Expo next wee.k But a pre-emptive strike by Sony, taking the PS2 down to $199, means Xbox is priced at $199, effective immediately.

Microsoft's press notice on the subject sort of confirms that the company has been outflanked: "O'Rourke [John O'Rourke, director of worldwide Xbox marketing] acknowledged that speculation surrounding a pending price reduction of Xbox has been pervasive in the last few weeks. 'The traditional forum for making an announcement of this magnitude is the Electronic Entertainment Expo (E3) next week, but we've been ready to go for some time and can easily put this in place at retail now. We see no reason why eager gamers should have to wait a week to benefit from this tremendous value opportunity.'"

Microsoft says it still expects to sell 3.5-4 million Xbox units by the end of June, which suggests the cut is more defensive than aggressive. It is also planning cost-related adjustments to Xbox manufacturing; production at the Flextronics plant in Hungary is to be run down, with a South China plant taking over, and Microsoft is looking for a second, non-Flextronics plant in Asia. ®