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"...we don't see Nintendo as a direct competitor. We actually believe that the Wii complements the Xbox 360 experience. While they're talking to a very casual user, eventually, those users will want a much more immersive experience. We think they'll eventually upgrade to an Xbox 360." - the words of Aaron Greenburg

Now, if all this is true about the X-mote and Mii rip-offs, it's clear that Nintendo is directly influencing Microsoft's business and the Xbox360 is in direct competition with the Wii.