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Sadly, there's not much Microsoft can do anymore. They went and shot themselves in the foot, by not making the 360 future-proof -- no next-gen drive, no option to plug in a bigger hard drive, some models without any hard drive at all. The PS3 was already a far better value for not that much more money.

And then they proceeded to reload the gun... and shot themselves in their other foot with RRoD. It's not just crappy hardware, they lied to us consumers for almost a year about the problem (remember Peter Moore's famous response to an irate customer: "Things break"), until impending class action lawsuits forced them to change their tune.

They're done for this generation. Bag 'em and tag 'em.