As it stands currently that's true.

As I understand it only one of those(Windows) is profitable and that's why I don't see them being connected forever. 

They won't.

Its more likely that this will be the final XBox to push technology. I think they'll now focus on the same pattern that Google/Apple/Amazon have shown with full mobile set-top boxes that have some gaming focus.

Basically, they'll change to lower spec'd machines that run an all digital Live system. Probably stream higher-end games so they can also compete with future Nintendo/Sony consoles.

This is an important long-term goal for them in order to keep Windows and Office important. If they lose the living room its only a matter of time before they lose the office as well. People won't want to have different OS in their different environments.

I can see how such a drastic change in strategy might make it more palatable to shareholders than the billions spent establishing xbox.  As it currently stands I'm not sure how much xbox adds to the windows and office ecosystem. 

Bingo.

Microsoft is a corporation bent on making money. The third time's the charm. They were promised hefty profits, all they have after a decade+ is net losses on the ordeal, with no end in sight. XB1 is well on the way to being outsold 2 to 1 globally for the generation, the value-add paywalls aren't working, and huge sums were spent on Kinect2 which didn't pan out.

The shareholders would revolt at them investing even more in a losing battle.

It's not all roses for Sony either. PS4 is selling ludicrously well, but if it isn't profitable enough, they won't have another stab at it either, just ride PS4 for a decade and then be replaced with generic streaming tech that isn't dependent on a specfiic local box to work.

Xbox isn't integral to MS. Like other have said MS could drop Xbox right now and still be swimming in money. I'd be more concerned with who picks up the Xbox brand or buys it. Hopefully Amazon or Google. But no point in dwelling on something that has a 0.1% chance of happening.

Xbox is what Windows Media Center tried to do. You do realize the only reason Xbox exists is because Sony stated many times their goal was to make Playstation replace PCs.

There is a reason Win8 exists and it is now on Xbox.

Its all the same long-term survival goal. MS realizes that PCs in the general sense as devices in the "home office" is going away. If they don't cement themselves as full entertianment machines now, then they will lose the entire home market to Apple and Google. Just as MS is nothing in phone/tablet market.

What that means is to strengthen Xbox and keep it moving forward so it is seen as the logical choice to "upgrade" from a standard pc. Of course most are just moving to laptops/tablets and there MS is already losing or starting to lose. (would go quicker if Android/ChromOS/iOS would hurry up and support Steam)

So yes, Xbox is important to Windows and indirectly Office.

I think Microsoft is a bit daft to even have those beliefs. Hopefully they will have realized their mistake by now if they actually made decisions based on such stupidity.

Windows and Office are not threatened by Sony in the least. Not even infinitesimally. Apple and Google are INFINITELY more dangerous to Microsoft than Sony is, and even they haven't convincingly challenged Microsoft in the business world, only the consumer world.

Whether or not someone has a Playstation or an Xbox or a Wii or nothing at all in their living room has JACK SQUAT to do with what someone uses at the office to do spreadsheets, email, etc.

Took it while on the bathtub.

I am very aware that is why they got into the console business.  

I realize that they thought it was a huge threat in 1995 when Playstation was breaking new ground.  Generations later and billions of dollars spent and seeing the "growth" of the segment I don't think video game console sell well enough to replace the money they make selling windows and office in the PC market(at least not with loss leading tactics).  I also don't see consoles fitting well with the most common pc use cases be that getting work done or the more casual use cases(far better on actual pc, tablet or mobile)

With Office on mobiles I don't see the need for them to spend so much money on making devices themselves.  Other manufacturers are willing to do it for them. Just continue to make sure their enterprise software excellent and popular so no matter the OS you want to use Office to get the work done.  I think MS should look at IBM and others and be a software and services company.  I mostly feel this way because so far it seems all of their hardware responses to competitors have been very expensive failures.  

That's quite admirable, I must say