Robbie Bach, the president of Microsoft's entertainment and devices division, has said that he believes Sony is focusing on too many different areas - and is feeling the strain as a result.
Speaking to the San Jose Mercury News, Bach defended Microsoft's decision to introduce new music player Zune to market, rather than a new gaming handheld.
At present, he said, the company's priority is to make sure that, "The second holiday for Xbox 360 is set up right, that we've got the quantities we need, that we've got the games we need, and anything I do to distract those guys is probably a bad thing.
"I think Sony, frankly, suffers a little bit from this problem, which is they're spread really thin across all these areas. And trying to do PSP, competing with Nintendo, PSP to DS; competing with us, 360 to PS3, I think it does strain - it would naturally strain any organisation," he added.
When it comes to competing with the PlayStation 3, "Right now we are thinking about how to cost reduce the Xbox 360. That seems to be the first order of business," Bach said.
"You have to ask the question, over the life cycle, who has the cost advantage? Who can price most effectively? Who can reach the price points quicker? That has a huge impact on what gets driven.
"Most publishers are doing their initial development work on the Xbox 360. That plays to our benefit. Because we are out there first, we have a bigger installed base of consoles. We can drive down the manufacturing curve sooner and faster. And because we designed a box that was fundamentally easier to manage on costs, we’re going to have that advantage," he concluded.
According to Bach, Xbox 360 will be "a great logical choice" for gamers who want to buy a new console this Christmas season, particularly as PS3 shortages continue - adding, "Our value proposition is just better."
He said that Microsoft's decision not to introduce a 2006 holiday price cut for Xbox 360 "was not that hard", explaining, "When your competitor is supply constrained, it’s not clear what price buys you.
"Sony is going to sell as many units as they can ship in the US. I don’t know that a lower price would make a difference in the outcome. As you go out into later years, cost and price are both important issues."
When asked how long it will be before Microsoft starts making money on Xbox, Bach replied, "To be clear, we have said that in fiscal 08, entertainment and devices makes money. That’s not exactly Xbox. We don’t break profit down by business. And there are parts of entertainment and devices that make money. Xbox doesn’t. Xbox has to make significant progress to enable E&D to get there."
However, Bach added, "We feel we are on track."