It's worse than that - Microsoft dumped something like $30 billion over the course of a decade into their home entertainment division, the vast majority of it spent on the Xbox and Xbox 360. They only started showing quarterly profits a couple of years ago - mostly from software, not hardware sales - and last I checked at the rate they're going it'll take them over a decade just to recoup their initial investment assuming software sales and prices hold up (which they haven't and won't on now-obsolete hardware). In other words, their investment in the console business will never even manage to break even.
Compare and contrast with Apple, which spent far, far less developing and launching both the iPhone and iPad, products which turned a profit almost immediately.
The console business has been a disaster for Microsoft since the beginning, and it's been a world of hurt for Sony since the launch of the PS3. The problem is, both Microsoft and Sony spent massive fortunes developing and subsidizing the "bleeding edge" hardware for their latest generation of consoles. By the time manufacturing costs came down to the point where they could realize hefty profits on both hardware and software sales for their platforms, Nintendo had stolen a good chunk of the market away with the cheaper Wii. Worse, all three consoles are now effectively obsolete, and they (and their software vendors) are competing with mobile devices from Apple and the Android vendors for consumers' dollars. And the mobile devices are crushing the consoles in the race for consumer dollars.
The Xbox 360 was supposed to last Microsoft until 2015, but if the Wii U is a success later this year, it'll likely decimate both hardware and software sales of Microsoft's outdated console. While Microsoft could unload another $20 billion designing, manufacturing and subsidizing a next-gen console, I just don't see how they can hope to ever turn a profit on that business. It's a lose-lose situation for Microsoft in the console business. If they don't shell out another $20 billion, they effectively drop out and never make their investment back. If they shell out $20 billion, they'll probably still end up an also-ran and never make their money back.
Of course, they could do something less elaborate with their next gen console, but they'll have already lost prime mover advantage to Nintendo, and lackluster hardware will rapidly be eclipsed by ever-cheaper PCs and increasingly capable mobile devices. In other words, their "next gen" system would have a shelf life of about 3 years. They'd have to produce something really cheap to make those numbers pan out, and it's hard to see developers expending a lot of effort on a platform they know is gonna be dead in under 5 years.
And of course Apple could completely wreck Microsoft's console business by using the firehose of cash they're getting from their mobile business to produce their own console. Subsidize a halfway decent box and follow the iPhone's cheap software strategy - keep the price of most titles under $20 - and you'd cripple Microsoft. They'd hemorrhage billions before being forced out of the market with their tail between their legs.
I think Microsoft's even more screwed than the conventional wisdom thinks they are. Their mobile strategy is a shambles, their console business will never turn a profit (and could end up costing them another $10-$20 billion), they're an also-ran in the cloud, and their OS and office applications monopolies are increasingly threatened by Apple in the home, and by Linux and cloud-based applications in the workplace.
Their patent portfolio is formidable, but then, so was Kodak's.
I think they have about 5 years left to turn it around before they begin a rapid slide into irrelevance, and I don't think there's a snowball's chance in hell that Ballmer could lead such a turnaround.