The Xbox division isn't a meaningful source of revenue for MS.
This is their third try, they've been second, last and now second. The console industry has a questionable future. It's just not worth it anymore. If MS aren't happy with the XBO's performance they'll sell the division.
I don't think they'll be able to easily, at this point, which may encourage another shot.
The Xbox has the following assets:
1) Brand name - currently being run through the mud.
2) Hardware design staff and functioning prototypes - the Xbone is making the PS3 look like smart design, and most likely buyers are either major electronics companies in their own right (Samsung, LG, Panasonic, possible surprise bid from China) or already have a decently-sized design bureau with a better recent track record (Amazon).
3) "Guaranteed" cash flow from XBL subscriber base - likely to be chipped away significantly as the CoD crowd migrates to PS+.
4) Internal studios - Lots of valuable assets here, but assets that are more valuable to a post-console MGS shipping AAA titles for PC and multiplat than they would be to a prospective buyer, especially because if MS -does- bail it will be solid proof that Halo and Gears are no longer system sellers.
5) Operating system - development intertwined with Windows development, basically unsellable and more likely to resurface as a kind of Dreamcast WinCE for the new era.
6) XBL infrastructure and software - intertwined with enterprise services, basically unsellable and more likely to resurface as a service similar to PS3's Gamespy and Steam integration on select games.
I think a more likely result is "Xbox the service" - providing a prebaked OS/online stack to a new competitor as part of an enterprise services push - combined with "Xbox the WP equivalent of Apple TV" as a more profitable and less capital-intensive offering in the living room.
Depends what they mean alive. In sales they wont win but they can still be doing well for themselves.
This is 100% true, but MS doesn't seem to want to take that road. The launch marketing budget of the Xbone alone was roughly as much as the profit the PS2 turned in its best year, which suggests that they honestly built the system and their strategy around the 400m+ figure bandied around prelaunch.