I think it is still too early to say that. Microsoft has yet to recoup the money they invested in the Xbox, and they probably won't anytime soon. And while they are still ahead of Sony in the console race, the PS3 has picked up quite a bit lately. Microsoft could very well finish the race dead last at the end of the current generation, with Sony at the top spot and Nintendo a close second.

The only problem is they have to actually do the catching up.

I'm not sure they can.

This market is much more complex, with a faster-moving platform, more hardware innovation, and competition (Apple, Nokia, RIM and Google) that can't be bullied or out-spent.