Innovation has been costly • Microsoft took a $1 billion charge in 2007 on Xbox hardware defects and a $900 million charge on unsold Surface inventory this year. And it's not clear whether the company's new user-interface technologies are as advanced as they need to be to make money. As several reviewers have noted, Kinect's voice-recognition ability is hit and miss.
It positions Microsoft in the living room • Microsoft's Xbox 360 and Sony's PlayStation 3 each sold more than 80 million units globally. Strategically, pulling even with the game console leader was a key win because it prevented Sony from taking over the living room. The strategy was intended "to create a halo effect for other Microsoft consumer devices," according to Evercore analyst Kirk Materne.