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Trouble with an "Xbox as PC" approach is that it would allow other game stores to sell upon it, such as steam, which would mean no more license fees for games sold on it.. which would mean it would be necessary to turn a profit on each unit sold, rather than sell at cost or slightly below with the idea the difference is made up from license fees on software sales.

You'd probably have to add ~$200 to the Xbox price to make it work.

$149 Xbox Series S dongle
$249 Xbox Series S 512Gb
$299 Xbox Series S 1Tb
$399 Xbox Series X 1Tb
$449 Xbox Series X 2Tb
$499 Xbox Series S handheld
$649 Xbox Series X Desktop PC 1Tb
$699 Xbox Series X Desktop PC 2Tb
$699 Xbox Series S Laptop PC 1Tb
$749 Xbox Series S Laptop PC 2Tb

It would push Xbox in a direction where it has a competitive advantage which I like.
Offer a MS Office/Gamepass bundle for $20pm exclusive to the Series S & X PCs and they would be a compelling option for many.