After weeks of speculation, we finally received confirmation last week that Microsoft was indeed dropping the price of the 20GB Xbox 360 unit to $299. However, the company pulled a bait-and-switch, as the 20GB model is being discontinued in favor of a new 60GB box. Sadly, this new system will not retail at the newly discounted rate, but will instead balloon back up to $349, the same price point as before the announcement.

Industry analysts are not impressed by this move, and Todd Greenwald of Signal Hill is the first to make his displeasure known. The analyst had some scathing words for Microsoft, stating:

"At USD 349, with a 60GB hard drive, we just don’t think it is a compelling product compared with the PS3 at USD 399 with an 80GB hard drive (along with more processing horsepower, Blu-ray, Wifi, HDMI, and going forward, more exclusive content).

"We’d also like to note that the Xbox 360 has just been surpassed by the Wii in the US, despite Microsoft’s one year head start over Nintendo."

Ouch. Greenwald also went on to state that he believes Sony’s lineup of exclusive titles (among them Killzone 2, LittleBigPlanet, and God of War 3) will be more than enough to offset the Xbox 360 exclusive Gears of War 2 this holiday season.

Greenwald makes a good point in the fact that Microsoft, by stubbornly clinging to a mere $50 price differential, is shooting itself in the foot. Sony is already killing the Xbox in sales ever since the two units assumed this small price differential, and now a hard drive of double the size at the same price just further makes the PS3 look like the more attractive option. If present trends are any indication, look for a sharp rise in PS3 sales as the holidays draw closer, as the Xbox 360 continues to slack off and lose its grip as this generation’s must-have console.