You don't need Xbox branding, marketing and customized hardware anymore, it just needs further unification and slight modification Windows OS. With the rumblings of ARM based CPU/GPU/NPU coming from NVIDIA, AMD, and a decent Snapdragon Elite X processor from Qualcomm, along with powerful x86 APU's coming from AMD (and soon to follow Intel, and perhaps NVIDIA which will most likely be ARM based) this Xbox division in my personal opinion is useless and needs to be dropped. Here are my ideas and suggestions:
-Make Direct X 12 Ultimate API universal for both x86 and ARM
-Make a UI within the Windows OS (x86 and ARM) for gaming (xbox like UI)
-Make SDK/Software dedicated to converting existing x86 game code to native ARM fully optimized/polished (Project Voltara comes to mind along with playing Triple A games on ARM based tablets, laptops)
-MS to make its own console like PC to be part of its surface line up to spark and give OEMs inspiration/incentives to make their own console like PC's you connect to your UHDTV's (no customized hardware here)
They just don't need to be in this 'console war' or 'console space' anymore. With dismal sales of Xbox in Europe, the solutions/suggestions I propose will always guarantee PC gaming sales, reduce costs/time/constraints in gaming development, allow consumers to play games anywhere (imagine playing a game on your desktop only to continue off on it on your ARM tablet).
I personally think it's a blue market strategy, let Sony and Nintendo have at it in the red market console war space. Nobody is going to have what MS is going to have. It's also a win-win for consumers because it gives gamers more choices than ever and enjoy the best of both worlds (consoles from Sony and Nintendo, and console like PC's from MS/AMD/INTEL/QUALCOMM/NVIDIA). There is no need for Microsoft to 'win' the console space or war, because it's not a necessity to be in it anymore.