Microsoft is a heavyweight in game consoles now, but before it made its mark with enormous controllers and Master Chief, the company was looking into ways to get a foothold. One idea was to purchase an existing company like Sega, but then-CEO Bill Gates felt the house that Sonic built lacked the "muscle" to compete with Sony.
Joachim Kempin worked at Microsoft from 1983 to 2003, and had an inside look at the machinations of Microsoft's cracking into the industry. "There were three companies at that point in time, I think this was [Sony,] Sega and Nintendo," he told IGN. "There was always talk maybe we buy Sega or something like that; that never materialized, but we were actually able to license them what they call Windows CE, the younger brother of Windows, to run on their system and make that their platform. But for Bill [Gates] this wasn’t enough, he didn't think that Sega had enough muscle to eventually stop Sony so we did our own Xbox thing."
Kempin says Sega was "a very different bird," and that Nintendo was having financial trouble at the time of the 3D transition, which led Sony to capture the market quickly with its first PlayStation. "They took off, and everyone else was left behind."
While Microsoft never bought Sega, they did eventually get former Sega COO Peter Moore, that handsome tattooed devil.