This is all assuming that 360 does not win this generation - and all indications are it will not - the primary source of strong sales for 360 right now are the USA, Canada, UK, Ireland, and Australia - all well off English speaking countries.

I think in time however, the Xbox brand could become Microsoft's most successful venture outside of the Windows/Office empire.  For Microsoft to win a generation, five factors must be present.

- Strong sales the generation before - at least 40 million worldwide so that developers will anticipate a big base from the get go.

- Cheaper pricing at launch across the world - even if it means taking an initial loss, or less potent (for the time) tech.

- Sales must be over 5 million in Japan - ideally over 15 million however.

- Starting with Xbox 360, Microsoft must prove to investors it can be profitable in gaming over the course of a generation.

- Microsoft must develop a differentiation tactic - Genesis had Sonic, SNES had Mario, PS1 had CD tech and more 3rd party supprt, N64 had sporadic 1st party games, PS2 had DVD playback - good 1st party support, strong 3rd party support, Xbox had Halo and strong online, GC had Nintendo as a selling point.. some would say the box/cube motif confused customers on the whole GC vs. Xbox thing last gen.  Essentially, to casuals I think Xbox was seen as PS2 lite, which hurt Xbox since PS2 had an enormous lead and momentum from launch.  This generation 360 & PS3 are very similar in terms of content offered, pricing strategy, and demographic.  With Wii, Nintendo took a step back and saw that it would be easier to gain support by tapping a new demographic, and used that to design their console - knowing they would gain traditional support anyway.  Microsoft needs to try the same thing to win a generation.

With that said, I think 360 will meet two of the five points I laid out - 40 million sold to gamers, and cumulatively profitable by generation end.  In Japan, sales will be no where near 5,000,000, let alone 15,000,000, but I think 1 million is a reasonable goal (that may or may not be attained) in Japan this generation.  That is about the strength Sega had with the Master System in Japan, so I think Microsoft will be poised to sell 3-6 million consoles with their next console in Japan. 

Now, as to the other points - I'm not sure if Microsoft has the imagination to come up with a differentiation strategy - as of now they probably think it is Live - but I think in time Nintendo & Sony will have that as well.  As for launching at a cheap price - I think it is possible if this strategy (360) does not meet Microsoft's original goals of say..60 million worldwide.  It also depends on how profitable 360 is.  Sales of 50 million overall with only 500 million overall profit would make Microsoft hesistant to launch at a cheaper price.  I think overall, Microsoft will be second this generation in terms of sales, will have comparable worldwide sales next generation (Xbox 720) in all markets but Japan (where sales will go up), and then be poised to beat Sony and Nintendo in cumulative sales two generations from now in ~2020.  I'm less interested, personally, in when Microsoft would beat Nintendo & Sony - and more interested in discussing what and how they would do it with Japan as an inpediment to be overcome in time.

um thread title does not really fit your thread. To the thread title - no they are not. Their will kill their old product if they have a new one.

honestly its hard to say but I believe they will be in 3rd place. They will be in 3rd place next generation market but will have a good percentage of the market. In the overall video game market for 2007 at least.. thats a different story.. I'm working on my own prediction editorial so I'll explain what I mean whenever im finished. My predictions will be yearly predictions not a total prediction for the whole generation.

X360 will do better than Xbox at generation end. Microsoft jettisoned the Xbox because they screwed up their contracts, they basically bought commodity parts from Nvidia and Intel, meaning these companies could keep all the benifits of cost reduction and screw Microsoft over, as they couldn't go anywhere else for these parts. What that meant is that they were still losing money on each Xbox at the end of the last genration, and basically couldn't keep selling them. This time, Microsoft owns the designs on the CPU and GPU (and everything else), and simply license the production. Therefore, they get the benefits of cost reduction, and negotiation for manufacturing. They also know they can't do the same with the 360 or people will completely lose trust in the brand. A lot of people already have.

 you do know the GPU is made by ATI/AMD... and the rights to it is owned by ATI/AMD

I think the X360 will be the last console that they would release. Probably they will made a console that you can put into your PC. PC users could buy a cheaper console with a lot of games because the market is really big. Games like Halo, would probably a lot more succesfull. This is just an idea but it will be atleast 4-5 generations before they will number one markets like South Korea, China, india buy a lot more Sony and nintdo consoles.

theyll do like they did the original xbox... cut its lifecycle short to try to get a headstart on sony and nintendo...screwing its fans over in the proccess

No, he was actually right. Microsoft hired ATI under contract to develop the GPU, paying for its design upfront. In return Microsoft owns all rights to its design and the freedom to manufacture any way they can. Currently it's being manufactured by that Korean semiconducter Fab conglomerate I think. Called TEC or something like that.

I still think 360 will end up last this generation with a close take over by PS3 simply because Japan has more regions WW to sell more in.

BTW, I think Microsoft's new GPU strategy is flawed in the other direction. Before they owned nothing. Now they own everything. In theory they can set up a blind bidding war for GPU manufacturing contracts meaning low prices. In reality, there's only two or three companies that can actually make the chips and aren't in a rush to fight each other over a low margin, high risk product. They also know Microsoft is absolutely dead without them, and may find a stagnating sales rate to be an unattractive contract proposition. If you can't manufacture yourself, then Nintendo's strategy is better, where you co-develop the chips, have the designer manufacture them, and maintain pleasant relations with the designer/manufacturer with promises of future contracts.