If Microsoft (Nasdaq: MSFT) could build and sell operating systems in the same way it develops, builds, and sells its game console system, it would be a much stronger player than it is today. As it stands, Microsoft's future flagship may not be so much Windows as the Xbox 360 and Kinect.

No, I don't claim that Microsoft will turn the Xbox 360 into a phone. What I do claim, however, is that the Xbox 360 will be able to do for Microsoft what the iPhone has done for Apple (Nasdaq: AAPL). Kinect is an inflection point in Microsoft's history, probably much more than we can see today. The platform shows all the genes to transform the way we interact with computers in the not-too-distant future. The next-generation Kinect will open up the door to a human-machine interaction environment that has been envisioned in countless science-fiction movies.

It is right in front of us. Wolfgang Gruener pointed out in a recent article how Microsoft plans to evolve Kinect from simply recognizing a human player to scanning a human player and rendering a person as a surrogate -- and inject the virtual you into a video game. If you think about it for a while, you may see a strategy behind Kinect and what a powerful product this really is.

Perception and evolution
I believe that, like the original iPod and the iPhone, Kinect is vastly underestimated for what it can do, even if its features right now are rather limited, because of the low resolution of its camera and limited processing horsepower. The Kinect body-scan patent, however, indicates that Microsoft is taking Kinect on a slow evolutionary path, similar to what Apple has done with the iPod and iPhone. The fact that it has not been taken seriously by its rivals in the past has given Microsoft a considerable time and experience advantage: Microsoft now owns natural data input, and if it is clever, it won't have to surrender this lead for years to come. Let's be realistic: No matter what Sony and Nintendo do, video games and countless other types of applications that require data input will take the route to body and gesture recognition -- without the need for additional devices.

Platform play
The iPhone and its iOS operating system are not isolated products. They are the most important cornerstone of Apple today, generating more than 50% of company revenue (including the iPad and iPod touch). Kinect could go the same route: If Microsoft is developing future products, especially Windows or future versions of Windows, with strong support for touch control, we could see an ecosystem evolve around Kinect: products that interact with Kinect; products that all run the same underlying software that connect to the same applications. Imagine a Kinect ecosystem at home that includes appliances, as well as computing and communication devices that are all capable of scanning and rendering your body. Wolfgang went in his article even a bit further and speculated that Microsoft could be walking down the path to a Matrix-like world with this technology. Microsoft could be taking a gradual-improvement approach and updating the platform once or twice a year to keep its rivals at distance.

Halo effect
The iPod and iPhone have had a huge impact on Apple's entire product line and reputation. If there's one product in Microsoft's product line that carries similar emotion and enthusiasm, it is the Xbox 360. Microsoft could easily capitalize on this foundation, and we are still stunned that Microsoft isn't using its Xbox 360 more for the marketing of its Windows Phone 7. In tandem with Kinect, the Xbox 360 brand is powerful enough and respected enough to pull Microsoft into the future. As a central platform that serves as a showcase for Microsoft's core products, there may be marketing and sales opportunities Microsoft has not had since the launch of Windows 95.

We are absolutely convinced that Kinect will be quickly evolving into a technology that is far more than just a video-game controller for comical sports games. This could turn into Microsoft's most valuable technology besides Windows -- and it may shift the company's core business to a new, evolving product that leads to a new generation of computer products.

Keep an eye on Kinect. We are about to witness the start of a new era in computing.

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