MS is just plodding along on the same path they've been on for a good while. The XBox is only viable as a defense of the Windows-PC. If MS hadn't done anything, we would have seen the day when the new home computer would have become the Sony PS. And from there, it would have progressed, to the office, to web-servers, business servers, supercomputing.
Competing on the console market, undercutting profits, forces Sony to remain a console.
So far so good. But this takes on a life of it's own, thanks to stupid in-Microsoft feuding and competition. And there, the XBox crowd have been backstabbing, undermining and burying PC-gaming.
This is a huge strategic mistake by MS. PC-gaming is really the ONLY reason we need Windows. But there's a lot of things Ballmer doesn't understand. That's why MS haven't really made any progress with him at the helm.