Microsoft Nears Xbox Equilibrium

Although software on demand and software as a service are two hot topics at this gathering of some 800 investors, executives and analysts, Liddell indicated that talk of converting Office to a Web-based service is premature, at the least. "It's theoretically possible; we're keeping our options open," he said. But demand would have to come from customers, and so far, he said, that demand has not materialized.

The Xbox 360 is Microsoft's second attempt to crack the video-game console market. Its predecessor was the original Xbox, which launched a year after Sony's (SNE - Cramer's Take - Stockpickr) PlayStation 2 and was never able to make up the lost ground. Sony has sold more than 90 million PlayStation 2's worldwide, compared with fewer than 30 million Xboxes. And while Sony's games division has seen healthy profits for years, Microsoft has lost billions thus far on its Xbox effort.

With the Xbox 360, Microsoft hoped to learn from its mistakes. The company debuted the new console last November in a conscious effort to introduce the new machine well ahead of Sony's PlayStation 3, which isn't expected until sometime later this year.

But many analysts believe Microsoft might have lost a critical window of opportunity this past holiday season. Although the company had the only next-generation game console on the market, shipments of the Xbox 360 were far behind demand in North America. In the U.S., for instance, market research firm NPD Group estimated that barely more than 600,000 units made their way into consumers' hands by the end of last year, which was far fewer than analysts had originally hoped.