Xbox on fire

Microsoft (NASDAQ: MSFT) would like to see sales for its Xbox 360 catch on fire so that it can distance itself from the Sony (NYSE: SNE) PS3 and catch the front-runner Nintendo Wii.

The Xbox is heating up. Some of the Xbox 360 Wireless Racing Wheel are beginning to smoke as the controllers hit an electrical overload and start to sizzle. According to several sources, the Redmond, Wash.-based company said owners of the controller should stop plugging it in. Microsoft has offered to replace the part but it is not clear how many new pieces of hardware it will have to send out.

How humiliating. After a massive recall and warranty extension that cost the company $1.1 billion in the last quarter, now the world's largest software company has to contend with hot race wheels.

There is a short and simple lesson in this. Microsoft is a software company, and by most measurements, the most successful ever created. Hardware is not its bag. It has never made money on the Xbox and its new Zune multimedia player is a failure.

While trying to diversify behind its core business to find new growth may be a good idea, getting into businesses like game console manufacturing is far from the company's core competence. And, that has turned out to be a bad idea.

Douglas A. McIntyre is a partner at 24/7 Wall St.