They sold a lot of XBox 360s, but that division has never made much money, which is the point.

References: http://www.microsoft.com/Investor/EarningsAndFinancials/Earn...

(Of course, check out "gross margin" and not "revenue.")

Microsoft doesn't make money from consumers because there is basically no money in the consumer software market (not billions of dollars anyway). They stay in the consumer market not for profit but for mindshare.

Balmer explained it in his exit interview:

Q: I'm curious why you guys are so taken with being a player in consumer. Why not 'just' be IBM? You're already so successful in enterprise, why not just focus there?

Ballmer: I would say -- and I'm going to actually even let John (Thompson) echo, because this is one where I think the board and I are on the same page together, but it takes some thinking to get there.

The key isn't are you in consumer or are you in enterprise. If you're going to be in e-mail, you're going to be in e-mail. You can't say, okay, I only want to be in enterprise e-mail. If you're in real time communications, what, you only want to let enterprise people talk to enterprise people but never talk to consumers? These experiences span.

Similarly, if you're in devices -- and we are in devices. With Windows, the Windows operating system means we are in device definition. And nobody has ever managed to figure out how to build a device for a user that was just enterprise or just consumer. These core experiences do span, 'consumer and enterprise.' These core devices span consumer and enterprise.

So I know there's a lot of press, blah, blah, blah about this, but the truth of the matter is I don't even know how you could opt, what it would mean to just opt to be all enterprise, unless you want to look like Oracle and not participate in certain high value activities, or you want to choose to look like Apple and not participate in certain enterprise activities. But that's not where we grew up. We grew up with a horizontal experience called Windows and Office that's equally applicable to people in their personal lives and their professional lives.

They are using the Xbox as a gateway to the living room to launch other businesses, rather than trying to make lots of profit on the Xbox directly.

I think they'd like that to be the case, but it hasn't worked yet in that division's decade-plus existence.

Unless we're going to say that the XBox is helping them sell SQL Server and Office licenses over in the other divisions.

It's a long play. Xbox got them in to the fray. Xbox 360 got them to the front of the pack. Xbox One is probably where the plan is supposed to come together.

They've thrown a lot behind it, but I think it's also worth appreciating the headstart they were reeling in.

The NES came out in 1983-85, Playstation came out late 1994 and Xbox in late 2001. Microsoft came in with a fairly cold gaming brand and new image.

I don't think Xbox ever dominated the console market the way Windows dominated the desktop operating system market or Office dominated the office application suite market. Not even close. Same goes for .NET. These are clearly very successful products but are very far from "dominating the market".

Different uses of the word. 30% market share is dominating in my book, and I believe both of those do that in their markets.

Windows is on a whole different level, you cannot compare anything to it because nothing comes close. 90% market share is practically impossible.