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Xbox price cut not seen for U.S.

Microsoft cuts the European price of its Xbox game console, but U.S. prices are expected to hold steady, analysts say.

Microsoft cuts the European price of its Xbox game machine Thursday, but analysts said not to expect another U.S. price war among game console makers.

Microsoft said that effective immediately, the Xbox will sell for $216 (200 euros) in mainland Europe and $204 (130 pounds) in the United Kingdom. The Xbox previously sold for $270 and $250, respectively, after an earlier round of price cuts shortly after the Xbox's European debut last year.

The price cuts come just a month before the Electronic Entertainment Expo (E3), the game industry's main trade show and the launching pad last year for a round of price cuts by all three major game console manufacturers.

Analysts said similar U.S. price action is much less likely this year, however. Current U.S. prices--$199 for the Xbox and Sony's PlayStation 2 and $149 for Nintendo's GameCube--are fairly low by historical standards and close to or below manufacturing costs for the consoles.

Console makers are more likely to try to boost sales by offering more bundling deals, in which consoles are sold as a package with several popular games at a reduced price. Bundling helps boost sales while driving up the number of games sold per console, an important measure of success in the game business, said Billy Pidgeon, an analyst for research firm Zelos Group.

"I don't really expect any severe price-cutting this year," Pidgeon said. "I don't think Microsoft can afford much more price-cutting, and $200 has historically been a good price point for the middle of a console's life cycle. Bundling deals with first-party software or third-party products is a good way to add value while keeping the price steady."

IMAGE TEXT HERE David Cole, an analyst with research firm DFC Intelligence, said price cuts are more likely in the fall, as console makers gear up for the critical holiday shopping season.

"A price cut could be a way to spur sales in summer," he said. "But then you lose out on the opportunity to make a big splash in September. For now, I think you're going to see them be more creative with bundling and other kinds of deals."

The European price cuts are a special case, Cole said, fueled by the pallid performance of the Xbox in Japan. "They're struggling in Japan, so getting a stronghold in the European market is key to long-term success for Microsoft," he said.