Nintendo wasn't propping anyone up the last 10 years.  Sony carried and expanded the market, not Nintendo.  Personally, I think it would be awesome if Nintendo was a software company, or at least partnered with a hardware company.  Of course, it would be my dream for them to combine with Sony.  Even if that never happens, their strength has always been the software, not the hardware.  They tried to depend on their first party games to sell their consoles the last 10 years and they found out it didn't work.  Despite having some of the best games ever made every generation, they still need third party support and hardware power.  They have gotten some third party support back, but we'll see if they have the hardware to last because there are a ton of games that the Wii won't get. 

The simple answer is that MS didn't think it was going to turn into a $5 billion pre-emptive strike.  They thought originally they would be able to turn a profit by the 3rd or 4th year and that the next Xbox would be profitable within a year.  Overall they expected it to not actually cost them any money long term.  Then poor sales necessitated early price cuts, then they discovered their contract with Nvidia was poorly worded and was costing them somewhere between $10 and $20 per unit, then non-Halo 1st party games continued to flop, then the bill for launching a super machine 1 year early came due....  In short it simply bled more money than MS imagined.  That's not to say that MS didn't plan to stick around and make money in the business, just that it could have easily been a secondary concern.

The shareholders would probably have a tough time getting a majority vote to force MS out of video games, but that's not the only way a shareholder revolt can occur.  If the major shareholders begin to loudly grumble and raise hell at mettings MS will have to listen eventually, if only to stop the negative press.  Major shareholders could also threaten to dump some or all of their shares and buy Apple is another tactic that has been used before.  So just because they can't muster a majority doesn't mean they are powerless.  I know shareholders were demanding MS diversify back in the 90's.  At the time MS was resting on its Windows/Office laurels and doing nothing.  However, I don't think losing $5.4 billion over 5 years ($1.4 billion in 2006 alone) is what they had in mind.

Admittedly that $5.4 billion is out of the $100 billion MS has had in profit and cash these last 5 years which isn't too much.  That being said had MS just invested the $26 billion they spent on Xbox in the stock markets it would have earned them over $32 billion instead of the $21 billion they got.  That's how business' gauge business ventures, not just on profits but on whether they made more than they would have from average investements at around 8% a year.  Seeing as the 360 is still showing no signs of profitability (per unit profitability is good but I doubt they are close to paying off initial costs and R&D yet and unit profits will disappear if they have to cut the price soon), I think it is fast getting to the point where MS will never be able to earn enough in video games to be overall profitable, assuming they become profitable at some point.  MS has a lot of money and the shareholders want it to diversify but that doesn't mean MS couldn't be doing something better with its money or that shareholders are happy with how it is spending the money to diversify.

Albionus, 

                   Great post.  

didnlt MS cash reserve go from 60 billion to below 30 in the last 3 years ?

Wow to your post before this one, take some business classes or even basic economic classes.  A guy who understands that losing $5.4 billion over 5 years with no end in sight is not a valid business model is not a "maroon".  Thinking that blowing and continuing to blow that much to capture the "high-end" market in a single country is worth it is much closer to maroon-ville I'm afraid.  The fact that Sony sank to MS' level and is fighting soley on that front is not a testament to MS' brilliance but to the rank arrogance and idiocy at Sony.

As for Japan not buying GM, they do it for the same reason I only buy Toyota or Honda cars, quality.  Same with other "heavy industry" products like the Xbox, GE, Kenmore, etc.  I wouldn't say the 360 sells fine everywhere else.  Sales in the US are not great, barely acceptable is more like it.  It had the worst 2nd place showing since the NES days (when there essentially weren't any).  European sales are only good when compared to non-existent Japanese sales.  Yes, even if the 360 has more RPG's than the PS3 I'm not surprised Japanese would stick with the PS3.  It has the RPG's they want (the ones that are up XV size numerals), will have more in the near future, and doesn't have the terrible quality of the 360.  Again, that is a major concern for Japanese, they are used to products they buy actually working.  Strange people I know, but don't blame them MS can't make a high quality system.

I think in 2004 it was they made a massive dividend pay out after the double tax on dividends was eliminated.  It was something on the order of $20 billion and was their first dividend ever.  It was so large it affected national personal income figures for that quarter (it alone caused them to rise 1%).

Microsoft is aiming for 3 consoles, before making profits. For this generation 360 will be last. Because PS3 has build-in Blu-ray, a Blu-ray addon will work but not that great. PSN is free, hardcore gamers will pay for LIVE casual gamers won't. Games for Windows don't think Valve games will come to Games for Windows. Halo 2 for PC it's too old. PS3 could get rumble 2.0, and maybe PS3 will get some gloves whichwillmake it worse for 360. 360 is getting better support from third party. PS3 has more 1st party than 360. More 1st party will lead to more third party. PS3 is losing exclusives not third party. I think they are trying to attract hardcore gamers with Blue Dragon & Lost Oddesy. It's Turn Based which is wrong to attract mainstream Japan. They need to make Real Time RPG's. Mistwalker is not enough. They need a Xbox 720, to Break-Even, that will be 2016 or later.

It's entirely possible Microsoft doesn't care whether they turn much profit, so long as they're generating a new revenue stream, but they don't want to be bleeding either, though compared to Windows it may be moot anyway because $1 billion annually on $46 billion in sales with $36 billion in profits isn't much. They aren't being aggressive enough with 360 to make me think they don't care, though. Microsoft leapfrogged a 20 year veteran and put another out of the hardware business with its first entrant, while building one of the strongest stables of internal development talent (and growing rapidly), a generation headstart on building the largest online gaming presence, and significant third party support, including a vice grip on many of the previous PC developers who didn't want to venture into the console market pre-Xbox. Not a bad start for something that's worthless. The ironic thing is that Sony's the one that doubled the size of the market in a decade, yet for some reason, Nintendo's being credited with the "genius strategy" of going after new gamers (as if that's not something they do all the time considering their market outgrows them and they have to seek fresh new faces on a regular basis, but whatever).

I think Sony will pull of more online gamers than Microsoft. 6million gold and silver so how many are gold? PS3 has not much online games, but they will come.

 6 million Live overall.

PSn has passed 1 mill already.