Microsoft has made billions of dollars from hardware. Long before XBOX which makes a meager profit, there was, is the Microsoft Mouse business. Here is a paper from 1989 on an early Microsoft Mouse.

Paper presented at "Interface 89"

The Sixth Symposium on Human Factors and Industrial Design in Consumer Products

Human Factors Society POBox 1369 Santa Monica California 90406

Microsoft Mouse: Testing for Redesign

Bill Verplank, Kate Oliver, IDTwo

ABSTRACT

As part of the redesign of the Microsoft mouse by Matrix Product Design, a series of user tests were performed by ID Two. We used artificial tasks representative of typical mouse use allowing repeated measures of time and error.

One of the Microsoft old timers told stories of how no matter what he presented in a product review with Steve Ballmer, he could never win. As there was no way the hardware could achieve the margins of software. With Xbox, Surface, and now Nokia phones, Microsoft has the reality of having a low margin hardware as part of its revenue stream.

Microsoft has pushed the general purpose software SW licensing model for the longest and made the most amount of money. Google doesn't sell a one time purchase of SW. Their service are either free or a subscription service.

Amazon tries to break even or lose as little as possible on a hardware sale, making up the money on services. Xbox is the same.

Making hardware is hard. Making money on hardware is even harder.

The technology world is changing and it is just the beginning.