BusinessWeek.com’s article “How Much is Too Much?” is a pretty good look at what the Xbox is costing Microsoft. The two main points that the article makes is that it is unknown how much MS is willing to spend before giving up but more importantly it points out that the value of Xbox isn’t just in the money MS makes - or losses - but in how much Sony must spend to compete. In the end the Home and Entertainment division, which covers Xbox, may never make money but the company may still profit from it by keeping Sony out of the living room.

What this article doesn’t point out is that Sony isn’t the only battlefront MS faces. There’s Google in the search space. There’s Google again in the online office space. There’s Linux and Apple in the OS space. And Adobe in the content creation space. I’m sure there’s more that I have missed but these are the biggies.

The question becomes, “which battles can Microsoft win?”.

I think Sony is seriously scared of their position. They make some kick ass electronics but Samsung is hitting them hard in just about everything they make, besides game consoles. If the PS3 isn’t a home run then there may not be a PS4.

Google might be the only company out there that is more cocky than MS. I get the since that Google has an attitude of, “Mess with the best and die like the rest.” At least in the search space. In the online document space it’s a different story. Everyone knows that office type applications are going to become more web based. MS is rushing forward with MS Live and Google is putting together a suite. This is going to cost MS big time because it will cut into the profits of the MS Office line.

And the real stake in the heart for MS could be the OS. The more successful these online office suites are the less people will be tied to Windows. And it leads to huge conflicts for MS. Do they make MS-Live work only with IE and ignore the FireFox/Safari community? If they do then they risk losing this battle to Google. On the other hand if they make Live work across platforms then they enable people to easily switch to Apple or Linux.

The last battle they face is with Adobe. On the surface it would seem that MS will never seriously challenge the Photoshop/Flash line just like Adobe will never challenge the .Net line. But Apollo and Flex may change people’s minds. Give a developer the ability to write a full fledged application that will work on Windows, Apple and Linux OSes and you have a compelling argument to switch.

On top of that Apollo is going to enable a whole new class of applications that no one has even thought of yet. There’s no telling what markets that might open up but it looks like Adobe is going to be the first one in it. Though that is never an assurance of victory.