They are also a year behind M$, a dangerous place to be. M$ always play hardball. If Sony came up with a killer title, M$ could counter with a bundle for less than Sonys sell price. (A "Halo Pack" comes to mind)

There are few companies out there with deeper pockets than Micro$oft, and M$ are apparently already into the profit arc on this console.

I think Nintendo did the right thing by walking away from this particular pissing contest.