I'm not really sure why they felt they needed to make such a drastic price cut. Yes $250 is a bit high but I really don't think it is a major factor in the poor sales nor do I think it is due to people being happy with a smart phone. I have an iPhone and it does not work for real games. How can they not see that the biggest problem is that the 3DS has been out for 6 months and there are still 0 games that really make it worth buying a 3DS. Sure OOT is fantastic but it's the same game many people have already played. After that there is ... Street Fighter? Fighting games are still a niche genre and definitely not a system seller, especially when it is a port of a game that anyone who cares about it probably already has a better version.
The massive price cut screams of panic and really puts the 3DS in a bad light which is unfortunate because I think it is a great device and am really enjoying it even though most of my enjoyment has come from playing DS games that I had missed out on. Don't worry about dropping the price, don't give us free retro game just get your shit together Nintendo and release some fucking proper games and the 3DS will be fine. If only they had held back on releasing the hardware for a year it could have been the massive success they were hoping for.