"Humiliated in its early efforts to crack the videogame market, Microsoft has a bold new strategy: Design a videogame machine for people who don't play videogames.

Robbie J. Bach remembers well his early days as the chief of Microsoft's fledgling Xbox division. Visiting videogame stores in 2001, he would walk past long rows of games and ads for Sony's powerhouse console, the PlayStation 2. Bach, a Microsoft star who had overseen the launch of dominating products such as Excel and Word, would inevitably end his humiliating trek to the back of the store, where he would find a few shelves given over to Xbox games. "We got the last 4 feet," recalls Bach.

Four years and approximately $5 billion in losses later, Microsoft has fought its way to the front of the store. Twenty million videogamers have bought an Xbox and 170 million games for it. Its Halo 2 title grossed $125 million on its opening day in November. Though it will never catch up to the PlayStation 2's global installed base of 87 million consoles, the Xbox has won enough converts that last Christmas, for the first time ever, Microsoft outsold the PlayStation 2 in the U.S. " [more]