Analyst: Xbox Business a 'Disastrous Endeavor' for Microsoft

[Erik Aston]

Obviously MS needs to diversify. But they aren't going to succeed in any of their endevours if they keep entering existing fields. Sony, Apple, Nintendo, Google... These are the companies MS is worried about... But look at how those companies have continually created new markets over the years... Microsoft is merely trying to buy its way into the new markets that these companies have created... And it has failed every time... Even if it succeeded, none of those new areas are as profitable as Windows and Office have been, and by cluttering the field with a new, very similar competitor, they are ensuring that they will be less profitable in the future... MS figured out an amazing business model to both create the market for and gain a monopoly of PC OSs. But they haven't demonstrated any ability to repeatedly create new market space like these other companies have. Whether you want to call it "diversification" or "defense," the long list of areas MS is currently attempting to break into, (of which XBox is the most prominent, both for its reletive success and extreme cost) are never going to yield any returns. The way MS could have eliminated what they perceived as the Sony threat was not to release a PS-clone as they did, but to invent a market-expanding system like Wii, crippling Sony's ability to really push the PS line as a personal computer in their need to compete as a game machine. The way to eliminate the iPod threat was not to release an iPod clone as they did, but to come up with something like Apple TV or iPhone, which doesn't directly compete with iPod, but threatens it anyways by establishing a similar PC-to-entertainment device platform. But all of this requires Microsoft have some creativity, some ability to perceive consumer wants before any market indicates them, and the ability to design great user-experience focused products. And thats not happening with the increasingly messed-up corporate culture over there.