Microsoft once considered purchasing Sega before opting to develop the original Xbox internally, a former executive at the company has said.
"There were three companies at that point in time, I think this was [Sony,] Sega and Nintendo. There was always talk maybe we buy Sega or something like that; that never materialised," said Joachim Kempin, former vice president of Windows Sales at Microsoft, to IGN. "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 [for the Dreamcast]," added Kempin.
Kempin worked at Microsoft for almost 20 years, from 1983 to 2002, and saw Bill Gates resolve to enter the hardware business itself in a bid to take market share away from electronics giant Sony. "[Gates] didn't think that Sega had enough muscle to eventually stop Sony so we did our own Xbox thing," he said.
Before that, though, there was the idea within Microsoft that the company would purchase Sega in its entirety. "There were some talks but it never materialised because Sega was a very different bird. It was always Sony and Nintendo, right? And Nintendo had some financial trouble at that point in time, so Sony came out with the PlayStation and bang! They took off, and everyone else was left behind."
The original Xbox sold 24 million units before being replaced by its successor, the Xbox 360. Sega's ill-fated Dreamcast, by comparison, sold 10.6 million units in its three-year life span.