Whispers from the shadows tell us that Microsoft is in much better shape than many of us might have realized, and that will translate into a price cut that is expected to come next year. Due to cost improvements, Microsoft is apparently making more money on the Xbox 360 slim than it has made in a long time.

According to our sources, it is likely that Microsoft will drop the prices of both the low-end and high-end models by as much as $50 next year. It is already being suggested that the news could come as soon as E3 next year.

In addition to the price drop of the console next year, our sources are already squawking that they expect the price on Kinect to drop, as well. The plan apparently is for the price to drop in two phases, the first of which will see a price drop when Microsoft repackages to drop the Kinect Adventures pack-in title; and then a second drop closer to the holidays next year.

While we believe some of this is pure speculation, we do think our source on this one is likely right.