I think you're confusing what you want with what Microsoft wants. Microsoft would love to rule the game industry.

It would be a nice feather in their cap especially after getting thumped badly by Apple in the media distribution race/tablet/cell phone market etc.

They can tell their stockholders "OK, ok, Apple, Apple, Apple, Google ... but hey look at what we're doing in the game business, look at Kinect, look at our dominance here ...". It's something they can point to especially if Windows Phone never takes off. It's kinda like when you got a report card with one subject that was a D and another was an A ... well you could always kinda assuage your parents by pointing out you're doing great in this one subject and maybe you'll even come around in that other subject.

If I'm Microsoft I bait Sony into fighting the race like this ... it's a race that favors Microsoft. Sony isn't the same company they used to be 10 years ago, their brand (Playstation and Sony in general) has diminished considerably. This is where smart corporations if they have a killer mentality go for the kill.

If I was working at MS I'd also push to secure exclusivity deals on certain key franchises. If Nintendo can take Monster Hunter away from Sony (and I don't for a second believe Nintendo wasn't involved in that), MS should go at Sony on the console side too.

Microsoft loves to pick fights they know they can win. Right now they're in tough with Apple and Google with the smart phone thing, they probably are too late in coming to the market. But Sony? In the game business? I mean if you're Microsoft you gotta be feeling pretty damn confident about that. Any profit the game division makes for Microsoft is just peanuts compared to their other businesses, always has been, always will be. XBOX as a brand is a vanity project for MS, something to get them into the living room first and foremost.

Microsoft can't make Sony drop out of the console business. You're just being a bit of a fanboy here.
Even if the Xbox 720 pulled off PS2-level success, a profitable PS4 could keep Sony in the console wars even it sold at Gamecube levels.(or do you think a PS4 won't sell at all?)

If the PS4 was to sell at GameCube levels, Sony would drop out. The reason Nintendo made a lot of money during those years was because they were selling tons (and I mean tons) of GBA + Pokemon craze was still at a high peak (meaning the movies/merchandising/etc. on top of the game franchise).

Sony has gone from 120 million to 60 million this gen and been toppled in North America pretty convicingly by MS. If I'm MS, sure why wouldn't I be licking me chops and wanting to slash Sony in half again?

I'm not saying that as a fanboy, just from a POV of a Microsoft executive, I'd look at the game industry and I'd look at the sorry state Sony is in right now and I'd say "why are we splitting half the core audience with ... them?". It's a fair question.

If MS can really turn the screws on Sony particularily in the first 2 years of the next console cycle, they could have very easy sailing for the following 5-6 years.

im pretty sure he was talking about the Wii :p

1. The rumors say its based off the RV770 Only 2 GPU's ise the RV770 GPU thats the 4850 and the 4870. Sure the is also the RV770LE and that unit is based off the 4830, But since the rumors don't state the RV770LE and only state the RV770 we can assume its the 4850 or the 4870 GPU.

2. Nintendo would be able to get them cards very cheap, plus they wouldn't be off the shelf cards they would be custom made for the Wii U and more then likely made to use alot less power.

Now lets say Nintendo goes with the RV770 LE GPU

Your right i seemed to of missed that last one, but it still doesn't change my post at all as it only adds one extra card within the range of what it could be.

Now lets compare the specs again using the 4730

Now as you can see the is still no huge difference and the rumored PS4 GPU still doesn't have a big advantage.

Now why i think they would be insane to go with the 4730 instead of one of the 48xx cards.

First if you notice the power consumption, it is more then both the 4850 and the 4830 with no extra benefits. Now i know i said they could cut down the power consumption in a custom card, but wouldn't it be wiser to take a more powerful card such as the 4830 or the 4850 that already have lower power consumption then work with a weaker card?, plus the prices for the 3 cards are pretty much the same.

That's why i am 100% sure if the rumors a true that the Wii U will be using a card in the 48xx range, as it would be insane otherwise.

And to what you said that it "it could be even weaker than the 4730 for all we know.". It could also be more powerful.

But moving on, no matter what way you look at it, judging from the rumored specs the is not going to be a big power difference with the Wii U and the PS4.

But that's only if the rumors hold true, but atm we can only base it on the rumored specs and that's how its looking.

You are forgetting that the Orbis rumours state 2 GPUs not one. 

And the reason they may go for an even "weaker" GPU is that the Wii U is very small and the RV770 is not the most effeciant architecture arround, performance per watt isn't that great, even the 40nm revision the RV740 isn't great it that regard. And the Wii U is a very small console, they are just not going to put a large, hot, power hungry card in a box that small. In fact I don't see them using a card with a TDP of more than 50W TBH, it's 1/3 the size of a 360 slim and the Xenos was 60 watts before the die shrinks and you know the problems they had with heat. There is just no way they can put a RV770 bassed GPU that powerful in a box that small, it is physically impossible without going for a 28nm chip which Nintendo won't do because yeilds would be to low, nintendo always go for a step back from the latest die shrink to maximise yeilds and reliability so it will be a 40nm chip.

Now if they went with a cut down Cape Verde varde variant at 28nm they may be able to get a chip that powerful at a low enough TDP but they are just not going to do that.