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SpokenTruth said:
AlfredoTurkey said:

Sega, back in the day, did something similar and had to overcome a much greater deficit so, it's possible. But I don't think Microsoft wants it badly enough. For whatever reason, I think they're content right now where they're at in console gaming.

I think you have that backwards.  Sega Genesis/Megadrive launched with a 2 year headstart over the SNES but the latter outsold the former by a good margin.

Genesis/MegaDrive:
Japan - 1998
US - 1989
Euro - 1990
Sales - 30 million

SNES:
Japan - 1990
US - 1991
Euro - 1992
Sales - 49 million

When Tom Kalinski took over at SOA in 1990, Nintendo hardware (home console) had over 90% marketshare in the US. By 1993, that had dropped to under 50%. The Genesis was on the market for two years before SNES, but only had around a 6% share of the market. 

If Microsoft wanted to, they could hire the right marketing team, throw enough money around and truely compete. The blueprints are there. But again, do they want to? My guess is no.