Although there have been rumors for weeks or even months about a 40 GB version of the Sony Playstation 3 for the North American market, the company announced just now that a dumbed-down version of its powerful gaming console is to hit the market soon.

Earlier this month, gadget-oriented blog Engadget has come up with a series of secret documents from Best Buy that seemed to show the future introduction of a 40GB PlayStation 3 here in the US, starting late October/early November. Priced at $399.99, the new model was allegedly to arrive without USB ports and to have no backwards compatibility with PlayStation 2 games (not even software backwards compatibility).

They were right it seems, only that the model does have USB ports, just not four as the previous versions, but only two. Also a FCC filling codenamed CECHG01 was previously reported, which is closely related to CECHA01 and CECH01. CECHA01 and CECH01 are the names by which Sony designates the previous two models of PS3, so CECHG01 would indicate the upcoming one.

"We're choosing to focus on the PlayStation 2 consumer with the PlayStation 2, which remains incredibly relevant, and focus on the PlayStation 3 consumer with the new 40-gigabyte model and the great software coming out," Jack Tretton, president of Sony Computer Entertainment America said to Reuters. "Backward compatibility is a nice secondary consideration, but it's far from the number-one priority."

It essentially is the same configuration as that launched in Europe and Japan earlier this month, also ditching the multi-memory card reader, and will come bundled with a Blu-ray movie of Spider-Man 3.

Also, the price of the 80 gigabyte version will be cut to $500 from $600. The 40Gb model will go on sale Nov. 2nd.  The 40GB PS3s priced at $399 puts them right around the same prices of the Xbox 360 Elite and Xbox 360 Premium Skus, making for some great competition this holiday season.

Also, the 40 GB PlayStation 3 is only $50 more than its closest competitor, Microsoft's $349 entry-level Xbox 360 with a hard drive, though it is still $150 more costly than Nintendo's $250 Wii.

The motivations behind these price cuts and cost-saving policies are not only related to Nintendo’s suffocating rivalry or Microsoft’s continuous pressure, but also because Sony realizes it will again trail its rivals in the critical Christmas shopping season due to the lack of enticing games.

Indeed, potential “system sellers” have either been postponed all the way until 2008 (like GTA IV or Unreal Tournament III) or are already multi-platform (Stranglehold, COD 4, Jericho) meaning that buyers will be more interested in getting the games designed for other platforms (PC, Xbox 360) than for the PS3.