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Shorty11857 said:

Microsoft's first party is

343 Studios - Will take over Halo from Bungie after Reach
BigPark - New studio, first game will be XBLA game Joy Ride
Firebird Studios - No games announced yet
Spawnpoint Studios - Working on Natal game
Lionhead - Fable
Rare - A whole lot of stuff
Turn 10 - Forza
Xbox Live Productions - Two random arcade games
Wingnut - Not expecting anything from these guys

So they have 3 current studios, 4 who are essentially brand new and one who seems to be pointless and probably doesn't exist anymore

Just like to add that Microsoft also license out a lot of their IPs to be developed by outside studios. So it's not like they don't invest in games they just do it in other ways

Wingnut is making an XBLA game. It's awesome looking ... and free :D