Microsoft simply wants to build a bigger ranch that has racehorses, too. Microsoft is making the X-Box because times have changed. There was a time when a leading software publisher would have trashed its reputation in the business community by making a videogame machine, or even by making games for a videogame machine. Early game machines such as the Atari 2600 were snubbed as lowly imitations of computers, and they were soon blasted into oblivion by home PCs.
Nobody makes fun of games anymore.
Those numbers alone should explain why Microsoft is making a big play in the console market. If you want to grow a software business, games are a potentially winning strategy. Avid gamers buy several games a year, but not many PC users buy more than one operating system, word processor, or spreadsheet program each year. Some gnats say there's no room for another console because Sony, Nintendo, and Sega already have the market locked up, or because PCs make better game platforms. But they said the same thing when Sony was the newcomer, chasing after Nintendo and Sega.