Then it introduced Kinect.
Today, the tech giant is using Kinect to win big on a breakthrough that will literally touch millions of lives.
It is one of the reasons why Microsoft's stock has gained more than 20% this year.
What is Kinect?
You may recognize it as the best-selling add-on to the Xbox 360 video game. But it's much more than that.
It represents a revolution in how we will communicate with our computers, our TVs, and our smartphones.
For Microsoft, Kinect is literally a game changer. They lead the world in the technology behind it and it promises to be big.
But not just for Microsoft...not by a long shot.
The Promise Behind Microsoft KinectThe magic behind Kinect is that it responds to body gestures.
And while Kinect did debut to rave reviews, Microsoft executives really didn't understand how Kinect could change the world -- and rack up new sales.
But since its introduction in 2010, hackers have found dozens of very cool uses for Kinect-- none of which did much for Microsoft's bottom line.
This got the software giant to thinking that maybe they were sitting on a potential gold mine.
That's why Microsoft is now tapping the genius of young entrepreneurs to better monetize the technology behind Kinect.
You know, the type of guys who live and breathe cutting-edge high tech.
In fact, Microsoft recently picked 11 startups to work at its Kinect development offices in suburban Seattle. It's a savvy move.
After all, these guys get out of bed every day looking to create the Next Big Thing.
Already, the program shows great promise. Here are some of the slick high-tech ideas these young turks are already tackling: