I would argue that Gruber is wrong. Microsoft would have made money during it's Ballmer years, regardless of who was at the helm. When Gates left, MS was a Katamari ball rolling down hill, catching all the money in it's path.
Profits are a lagging indicator for a once-successful company. A large company with entrenched products can coast for a long time while in decline. For example, RIM basically sank in 2007-2008. They had opportunities to save themselves well after that, but that's when it started, and they passed up those opportunities. However, their decline didn't really show up in their financials until 2012.
Microsoft looks to me like they're the same way. Surface and the new Windows Phone are analogous to RIM's late, lame attempts to ship a large-touchscreen Blackberry. Microsoft is profitable for the same reason they've been profitable for the past couple of decades: Windows and Office. However, that's now a declining market. It's still huge, and they can milk it for a long time, but it's on the way out. It looks like they missed their chance to move on to something else in favor of hanging on to their cash cows as they sink.
http://www.microsoft.com/investor/EarningsAndFinancials/Fina...
The "Entertainment and Devices Division" is profitable, but contributes a negligible quantity to the overall profits.
And either way, the home game console is also a declining market.
Source?
I think the numbers back it up to an extent, though:
http://en.wikipedia.org/wiki/List_of_best-selling_game_conso...
None of the latest generation of consoles are near the top, despite the fact that populations are larger, and the population of people able to afford video game electronics is much larger. That the PS3 and Xbox 360 barely outsold the original NES, despite having access to a billion or two more potential customers, says to me that the market is declining relative to the overall computing world.
The Playstation 2 for example was king of the hill and dwarfed its competition (Gamecube/Xbox) but still overall you're looking at about ~200 million units. However, with the current generation you're looking at Wii, PS3, X360 all sharing an about even share with PS3 and X360 very closely tied, but the total is around ~250 million units.
So we're still seeing growth in that area, and one part that's not reflected is the added value in each platform in terms of revenue for each network (PSN, Xbox Live) as well as the growing list of peripherals (Kinect, Move) that are part of each platform.
Not only that, but PS3 and X360 had higher prices on their consoles, some even coming close to doubling the price (a top of the line PS3 at launch was $600 vs a $300 PS2).
I would say that gaming over all is becoming more mainstream to the point that the consoles are no longer the realm of hardcore gamers, because they wouldn't have kept those numbers up while people were buying iPads, iPhones and DS3's in such massive quantities if they were really a complete gaming replacement.