Absolutely. But they have to do something, since standing still will allow their competition to eat them alive, and I think that moving into hardware along with

Absolutely. But they have to do something, since standing still will allow their competition to eat them alive, and I think that moving into hardware along with their various services is a good move to at least try. It's probably too early to call it either way; the Xbox division took something like 6-7 years to start posting profit. Surface was (still is?) in the negative, but it's been gaining traction lately and if it isn't already profitable it will be soon. Surface in particular is a good example of what they should do in hardware: make something that nobody else really does and do a damn good job of it. There are other Windows tablets, but nothing comes close to Surface in terms of build quality and form factor. They tried to differentiate the Xbox One with Kinect, which didn't work, but points to that being their strategy. With Windows Phone though, I'm not really seeing it. The main draw is the OS (which isn't much of a draw because of the low marketshare -> no apps feedback cycle).