Microsoft will never win a generation unless they buy one of the major players video game division (particularly Nintendo's) to guarantee a win.
They just never win without some kind of monopoly help, ever. I mean they do win in OS (though that's changing after Vista slowly) and in Office software (though again its eroding with open office, iwork and others) but only from the monopoly they created back in the 80s with IBM's help (and copying the OS of the first mac and calling it windows, see "Pirates of the Silicon Valley")
Since the 80s though there has been no new microsoft success out of dozens of attempts.
Windows Mobile tried to apply the windows model to phones and is now a distant 4th behind symbian, Apple, Blackberry and will almost certainly fall behind Android soon enough.
Internet Explorer was monopolied into Windows to make it hard to break out but as soon as that link was broken firefox, chrom and safari have cut heavily into IE's marketshare, it will be well below 50% before the year is out.
They tried to take on the MP3 market with the Zune, they're happy to sell two million Zunes to Apples two hundred million ipods
There are other failures too, but to get to the video game point they have done just about everything they could to get the Xbox into a position to win from buying exclusives and downloadable content for millions to gutting the price of the console to less then even the FAR lower speced Wii to releasing a year earlier. For all their effort they are behind both Sony and Nintendo in terms of console sales from release (their lead on Sony is 100% due to the one year head start). While they are close to Sony (maybe some could argue ahead) they are as far behind Nintendo as Nintendo and MS were behind Sony last time out.
It's really quite simple why this is. Microsoft doesn't innovate, they copy ideas that already worked for someone else. Windows Mobile was a lot like what palm was doing and what apple did with the Newton YEARS earlier, Internet Explorer was a rip off of netscape, Windows of Mac, The Xbox of systems Nintendo and Sony (and Sega) have been making for years. Even the lauded Xbox live is a take off of Seganet (and at least Sega supplied the ISP for the subscription cost).
Unless they are able to come up with something original like Nintendo, Sony, Apple and other such companies are they will never win anything where they are forced to compete directly without help from the residual 80s monopolies.
Sony may never win again, maybe Nintendo will pull a gamecube with the Wii 2, but I would see another entry to the market from a new company winning 1st (as Sony and Nintendo have both done in the past) as more likely then Microsoft doing it.
I may be wrong, but again Microsoft has tried to muscle into dozens of preexisting industries and has NEVER won (other examples include Live Search at 10%, MSN which bombed, playforsure, webtv, ect). I know some might just claim MS hate and say I'm flaming, but I'm really not just saying things that are untrue (or haven't been said hundreds of places before).
Here's a good link giving a rundown of some of the Consumer Electronics failures I talked about.
http://www.roughlydrafted.com/RD/Q4.06/2E6D9BB2-FE1B-4556-8389-67BD581FBCCC.html