Sony stands firm that the PS3 is here to stay, for five to ten years at least anyway, while the Xbox 360 and the Wii were designed for immediate market impact. Right now Microsoft sells two Xbox 360 for every one PS3 sold.
"Sony also said that "unless things go really bad, [then] there's no way that at the end of a life cycle our competition is going to have a higher install base."
If Sony would match the price of the XBOX 360 (not the arcade model), I think they would have no problem outselling them.