What's even more worrying for Microsoft is that the iPad costs at least twice as much and was never sold at a loss.

If I was working on the development team for the next generation Xbox I would be wearing diapers to work.

When you take out the expensive high-DPI touch-screen and the expensive battery, you're basically left with an AppleTV. Those sell for about third of the price of the current generation of the Xbox. If the next generation AppleTV had a nice Bluetooth controller and installable apps, it's very bad news for both Microsoft and Sony.