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There are major flaws in the theory. First, the laws in the states and european union will not allow Microsoft to fold the console into Windows. They will have to remain separate until no one else ever sells consoles.

Their major objective is the living room/home. A cheap device in the living room that works well with Windows and expands the windows universe into the living room and controls your entire home from heaters to lights to pictures, to entertainment and beyond. Microsoft will not give up until that goal is fully achieved and Windows is in every electronic device on the planet. Gates' long term goal back in the early 90's was "Windows Everywhere". Whether that is good or not is up for debate but Microsoft doesn't hide this goal at all...