Nintendo’s staked its claim on the holiday video game console sales war, but don’t expect Sony and Microsoft to sit it out. Rumors suggest that Sony is gearing up to release its new, cheaper PlayStation 3 model just in time to make Nintendo’s Wii U look like high-priced old technology.

Gamereactor reported on Friday that one German retailer is claiming it will stock the new ultra slim PlayStation 3 with 12GB of internal flash memory rather than a hard drive come October. Sony Germany’s PR chief responded that he didn’t know anything about this new console.

There are multiple red flags waving atop this story. Gamereactor’s initial report doesn’t even name the German retailer in question. Still, the rumor jives with previous reports from industry analysts and leaked patents and images from Sony itself.

In July, images of what was purported to be a new redesign of the PlayStation 3 hit the web, shortly after FCC filings describing the machine were made public. The PS3-4000 model would be dramatically cheaper than current models thanks to its use of flash storage rather than an HDD. At the time though, it was expected that Sony’s machine would have 16GB of flash memory not 12GB. Sony was expected to debut the new model at Gamescom in Germany, pricing it at £99 ($154), but sources said that those plans were delayed so Sony could unload existing PS3 stock first. Two months later, and just in time for the Tokyo Game Show, it seems like now might be the time for Sony to strike.

Wedbush Morgan analyst Michael Pachter seems to think this is Sony’s plan. 

“The PlayStation 3 160 GB plus Move bundle debuted at $299 in 2010, two full years ahead of Wii U’s debut. It’s worth noting that PlayStation 3 160GB plus Move bundles have disappeared off of many retailers shelves, suggesting to us that Sony is starving the channel ahead of a new hardware introduction that would likely cost less than Wii U’s Basic Set.”

Seven years after the Xbox 360 came out and six years on from the PlayStation 3’s release, Nintendo is releasing the Wii U console on November 18. The machine and its tablet controller will run you $300 or $350 depending on the package you pick up. For a machine that runs HD games technologically on par with those from seven year old game consoles, Nintendo’s machine costs a pretty penny. Then again, Microsoft and Sony’s machines are still expensive as well. The 250 GB Xbox 360 is still $300 itself, as is Sony’s 320 GB PlayStation 3, though both companies offer models that come in below $250. Microsoft is even selling the Xbox 360 for $99 with Xbox Live Gold subscription plans through retailers like Best Buy. Now the PS3-4000 will let Sony undercut Nintendo by as much as $150.