As an observer of mobile market, I don't think this is normal price cut. Galaxy Nexus was more reasonably priced, $399 initially, then $349, see http://www.theverge.com/2012/6/27/3120987/galaxy-nexus-hspa-.... There is no chance for Google to make any profit on Nexus 4 at $199, if warranty and customer service cost is factored in. If the product is good, price cut to $249/$299 would be reasonable. There is obviously serious issue to justify such aggressive price cut. NOTE: Microsoft wrote off $900M after Surface price cut.
Regarding Nexus product quality, it is well known problematic. I never saw any Nexus phone with good camera, battery life, wireless reception. The customer service is problematic at best. These problems existed ever since Nexus One.