Although Microsoft pooh-poohed Sony's "big announcement" which turned out to be a PS2 pricecut, Sony stands by its decision.
In an interview, Sony's John Koller explains that by introducing a PS2 pricecut, they're stealing market share from the Wii:
So, yes, we do think the $99 price point could steal some share [from Wii]. From a technological standpoint, the Wii is much closer to the PS2 than it is to the next-gen consoles.
Nintendo has done a fantastic job of capturing young and female, which are two areas the PS2 has started to really grab a lot of share recently as well. That's an interesting battle and we'll see how it shapes up, but we feel very confident that the $99 price level will allow us to grab our share.
Yeah, watch out, Wii, PS2's gonna come getcha. Yeah. Anyway, Koller also vaguely explained why they didn't drop the price of the PS3, saying that they "need to run [...] a responsible business."
Pete probably said it best, but I can say when we look at all of our platforms, we have to look at them as a business, but we also look at them in terms of where that consumer demand curve is, which is very important.
I think a lot of people just say, "drop price, drop price" ... but we need to run this as a responsible business. [...] we also do believe in the overall value of the box and the perceived value that's inherent in the PS3 as a premium product is important. So we're doing our best to message that.