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) 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).

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.

That sounds outlandish. I'll get ripped for even suggesting it. I will be called an idiot for the insinuation that Microsoft can link Xbox the gaming suite to Xbox the streaming entertainment player to Xbox the productivity center.

That's often our first reaction in this society. To brand seemingly incongruent ideas -- things we have never conceived of before -- as dumb ideas, as inane. We teach our kids to color between the lines. To blindly respect authority. Don't do as I do just do as I say. That provides an almost certain route to a much less creative life than one might otherwise enjoy.

This limiting sentiment should not prevail in tech. Guys like Ballmer need to think like sci-fi authors and Hollywood producers. Let your imagine run wild, pull it back to reality, let it go again and make sense of that vision nobody else sees.

If you told most people 10, 15, 20 years ago that we would listen to music the way we do, pay for coffee on our mobile phones and spend hours a day sharing anything and everything on Twitter and Facebook ( FB) one day, you would have met more than a pair of rolling eyes.

Microsoft should be hard at work in small, secret teams right now. These visionaries should be spending every minute of every day thinking of how they can make the logical connection -- from logistics, user experience, utilitarian and marketing standpoints -- between xBox as the gaming, entertainment and productivity ecosystem.

It should be a device that extends across activities and environments.

Yes, that should be the strategy going forward. And, you're correct, Steve Ballmer is absolutely not the guy to lead such a big, bold revolution.

--Written by Rocco Pendola in Santa Monica, Calif.

Rocco Pendola is TheStreet's Director of Social Media. Pendola's daily contributions to TheStreet frequently appear on CNBC and at various top online properties, such as Forbes.

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