In recent years, Microsoft has augmented the video capabilities of the Xbox. Users can watch videos streamed from Netflix and Hulu, rent or buy videos from Microsoft's own Xbox Video service or even tune in live or on-demand TV from pay-TV operators.

The deal is a good one for both companies, said Brett Sappington, director of research at Parks Associates, a consulting firm. It positions Ericsson to be a major player in an industry that's consolidating. And it allows Microsoft to focus on one of its core products rather than having to compete with some of the giant telecommunications service companies that are starting to dominate the IPTV market.

"At a certain point, Microsoft had to make a decision on where to place its bets, and it's placed its bets on Xbox," Sappington said.

From the article, "Microsoft to sell Mountain View-based Mediaroom unit" by Troy Wolverton.

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