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Speaking of big bets ... there has been a great deal of coverage about the upcoming battle between Sony and Microsoft for next-generation gaming devices. Microsoft is unveiling its Xbox 360 this week, a few days before Sony is announcing its PlayStation 3. It raises an interesting question. Is the original Xbox a success or a failure? Microsoft has managed to crack into an existing market, but it has come at a heavy cost. Here's a telling line from a Wall Street Journal article: "Xbox-group losses have been about $1.2 billion a year since 2001." That's what it takes to crack into existing markets populated by large, powerful rivals. In the latest battle, most analysts still predict Sony to dominate. If Microsoft gets 25% market share in next-gen players, it will be a success.

Despite all of this, it probably was necessary for Microsoft to go into the gaming market. As the personal computer market continues to slow, operating system sales are just not going to support Microsoft's growth needs. Its efforts to get into the gaming market and the handheld market before warning signals were obvious shows that Microsoft recognizes the need to find new ways to grow. It is too bad it couldn't have followed a more disruptive path in either market, however. It might not have had to blow so much cash competing against a well-entrenched competitor.