That was then. Today, Xbox has earned its own spot in the world of gaming. It doesn't need Microsoft to gain consumer trust.
But, in a slightly ironic twist, Microsoft needs Xbox more than ever before.
Windows Phone 7 will be a great vehicle to expand the reach of Xbox. With Apple and Google attacking the living room, Xbox is already in many homes offering the ability to stream TV and Netflix.
Down the road, Kinect looks like promising futuristic technology that could be tied into a number of Microsoft products.