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Microsoft's Biggest Mistake

NEW YORK ( TheStreet) -- Over the weekend, my neighbor brought home Xbox Kinect. Last weekend, TheStreet's Robert Weinstein picked one up. I used to own an Xbox. Loved it. In fact, I have never heard anybody anywhere speak ill of this Microsoft (MSFT - Get Report) creation.

I get the feeling, however, that Microsoft CEO Steve Ballmer either hates Xbox or has no idea what to do with it.

Ballmer should be actively focusing everything his company does around Xbox. Doing so might save his butt from getting fired. I'm not sure Bill Gates can take much more of his friend and CEO's scatterbrained incompetence.

All it takes is a little common sense and something that's apparently even more difficult to come by in tech these days -- vision.

You have this product -- an excellent piece of hardware that blows away the competition. Nobody even comes close in the gaming space. And, from a broad living-room standpoint, you even beat the snot out of Apple (AAPL - Get Report).

Steve Jobs ate Ballmer's lunch in every single room of the house, but he could not dominate him in the living room.

It makes no sense at all to attack Apple in the traditional consumer market -- and, increasingly, in enterprise -- vis-a-vis desktops, laptops and mobile devices. Give it up. You lose.

Keep your PC business, particularly the relatively healthy parts, alive as best as you can. However, position your company for the inevitable death of the PC. Drop dreams of getting share in the tablet or smartphone market. There's a less than zero chance Microsoft can generate enough mobile success to even ding Apple or Anroid. They're in as bad a position as Research in Motion ( RIMM ), if not worse.

Look at Xbox as the hub for everything.

It already owns the image as the gamer's go-to device. It continues to slowly emerge as a broad entertainment center for the entire family. Ballmer needs to continue to push that angle and take things a step or three further.

Leverage Microsoft's other strength -- productivity software (i.e., Office) -- in tandem with Xbox.
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