Why would they get out of the xbox brand now?

They've just become profitable, and they've succedded in getting millions of people to pay money for their gold accounts.

All they need to do next gen is take a leaf out of Nintendos book and sell the console for a profit from day 1. This may mean advancing the hardware technology more slowly but I think thats a neccesary step next gen. As the cost of the industry to create hardware and software was simply too high in many segments of the market this gen.

I think the console company that will increase its hardware capabilities next gen might just be Nintendo, I wouldn't be surprised if Sony and Microsoft are far more cautious in comparison.

How does a site like this not understand that Microsoft is in this business to dominate the front room and when have they not been a consumer based company?  If they can get a strong foothold in the consumer entertainment business they'll start raking in the money.

the overall stategy is one thing, but this article is on profits as of now and their consequences in the present.... so the overall strategy is kind of irrelevant.

Bolded keyword

So does MS...

Look, when you need population growth to expand your business, it tells you something. An extra investment wouldn't make that much more money.

@ 2nd question: Sure. 50% of the human population never used a phone and never will. They won't use a computer either.

And look at the "new" and rising markets like india or china. Piracy really is an issue. Everybody uses Windows there, but MS won't see a cent.

Watch this video: It is very informative and they even talk about China and India. I think China as a market would be 15 times more profitable than the USA, if all of the MS copies were legal.

http://www.microsoft.com/presspass/events/ceosummit/videoGallery.aspx

I've had some time to read the article and it really touches on one thing that has bothered investors for some time...Stock Price.

MS stock has fluctuated between 20 and 30 for what seems like the last five years and and the dividen paid out by MS isn't comprable to other stocks in that price range so investors that have been holding this stock hoping for a surge in price are getting disspointed. 

And that is a fair complaint, the big problem is the short sighted solution this artlicle touches on.  Cutting EDD gives you a headline that could be run with and maybe gets the price to break that 30 barrier, but in the long run it leaves MS without a gateway to home entertainment and the revenue those devices can bring.

ISI Whyman's is no fool and he knows his comments are short sighted so I'm guessing his attempt to attack the EDD is to get a short term price boost so he can sell his holdings in MS at a premium and walk away.  Fortunately MS, knows where it is going and EDD is definitely in its future.

First, it may not be profitable if the consoles sell for a gain. This just means that sales are greater then the total variable cost. That division may still have higher fixed cost which will nulify any profit. Also, they could move resources from the video game sector to their PC sector. The point is that investors are tired of Microsoft playing in these markets with marginal profits.

Also, on the bold, no, Sony and Microsoft have to make the system stronger. They have forever put themselves in a shrinking box. The twop focus on their top market which demands better looking and sounding games. If Sony and Microsoft were to make system that were only marginally stronger, their consumer base will deny the system and their division will implode (they are too strong for lower consumers and not strong enough for their best consumers). If there isn't a noticable jump in power, the market will feel cheated.

It doesn't matter. This charade is about over. If it's not for the high cost and billions of loses it's going to be Nintendo disrupting them. There isn't much place to go from here.

Great post.  One point of - minor - disagreement.

I think MS are the company that has by far put itself into the position of needing to push the HW by linking itself so strongly to former PC genres, particularly FPS/TPS with all the graphical expectations that brings.

Sony does have the option to bail out more readily I think.  With the PS2 most of its install base certainly weren't worried about high end graphics, although obviously with the PS3 it has garnered a fair share of that crowd.

MS I believe would struggle to disentangle themselves so easily from the power race, although Natal may (or may not) change their position in that regard.

I get the feeling that both MS and Sony are wondering if they simply keep their consoles longer (after all a Wii2 looking at jump from Gamecube to Wii would probably only have similar power to PS3/360) by allowing costs to drop and matching Nintendo for motion controls.

Of course, the big unknown, as you point out, is what Nintendo do and whether they successfully disrupt again leaving Sony and MS with the choice of chasing the power crowd looking for the next big leap or with comparable base power in the consoles but behind in the experience.

I disagree. Microsoft is only in videogames to stop Sony from disrupting computers with a videogame system. They never had an intention of making money.

Sony is very different. They actually see videogames as a intergral part of their company. It has been successful for ~10 year prior. It was also doing well when most of the company was doing badly. Sony takes the videogame market very seriously. Microsoft doesn't as everything flows around Windows. Sony also uses videogames to launch their other products. The PS3 pushed HD and Blu-Ray and will push 3D amoung other Playstation products (a PSP2 will definatly push 3D). It is a very importaint part of their business.

As far as Nintendo is goes, they are still disrupting (the Wii's disruption is a constant thing). This is why the HD twins have motion controllers. They are defending their business. I do not think either of them really want to play in the expanded market and would rather serve their best customers (the so called "hardcore,"). Nintendo has definatly been the shaker this generation. Sony and Microsoft want to play with the upper markets and will fight to the death over them (of course, Microsoft is OK with this as all they are doing is trying to stop Sony. Everything they do is to counter Sony. I suspect that Microsoft is defending against motion controls because Sony is. If they didn't, they would be swollowed up). Nintendo is really a thorn in their side as they forced Sony and Microsoft to play the motion control game (which I'm sure Nintendo is happy about).

The x factor in all of this is the 3DS. Nintendo is likely trying to disrupt 3D, which means it's goal is to destory Sony as a company. I mean, why else would Nintendo, who refuses HD, make a 3D system. The 3D without glasses I think is a big part because I don't think people want to put on glasses to watch TV or play videogames (and what about use with glasses? It's annoying trying to wear two pairs of glasses). Of course, it will do other things as well. This could be they endgame for the videogame industry.