The staff at Redmond’s Directions on Microsoft maintains that with Xbox, the software giant sustained breathtaking losses, but gained a foothold in the market.

“Microsoft has always taken the long view. It routinely invests billions of dollars in expansive ventures such as Xbox, MSN, and Dynamics with an eye to far-off opportunities and threats. Once engaged, it very rarely retreats. The company will sustain breathtaking losses to gain a foothold in a market (think of Xbox) and endure hits to its image to change a business model that isn’t working (think of MSN).”

“Microsoft continually looks inward and studies how it can improve itself. But despite some long false starts and outright failures (LAN Manager, Windows Mobile, and WebTV), Microsoft has assembled the industry’s largest portfolio of enterprise and consumer software—the least of which generates revenue in the hundreds of millions of dollars.”