Give a lot of credit to the Kinect gaming console, which sold 8 million times in 60 days. Oh, it turns out Windows 7 has sold over 300 million copies, earning the title of fastest-selling PC operating system ever. Twenty percent of PCs connected to the Internet are using the OS.

While there was no activation information or sales figures in regards to Windows Phone 7 handsets, the most stunning figure was a $563 million loss in online operating income during the quarter. Or perhaps it wasn’t stunning because such quarterly losses in online operating income have become par for the course.

Begging the question “Has any company lost as much money online as Microsoft?”, Silicon Alley Insider offers a damning chart exhibiting that Microsoft’s online operating income has been in the red for the last five years. The last four quarters show $2.5 billion in losses alone.

But wait, you say, Bing is making serious inroads in the search game, especially with the Yahoo integration! Well, Frank Reed at Marketing Pilgrim replies, ”Let’s face it, the only reason Google has any competition at all in search is because Microsoft is willing to lose a lot of money to say they are in the game.” Ouch.

It makes you wonder long Microsoft will keep up the losses, especially as a 30% drop year over year in Windows and Windows Live revenue may spell future trouble with a reliable cash stream. But there are bright spots — first, the losses are declining, and second, Microsoft’s deal with Facebook could seriously turn things around, especially as public annoyance with Google in the search space grows.

As I’ve suggested before, Bing could get lucky and be that social search engine we’ve been waiting for… Or if Bing powers Facebook search, perhaps we’ll just use the social network for search fulfillment.

I can hear the echoes of nervous laughter — “Um… Good one, boss!”

WSJ reports that 10,000 iPhone users accessed Microsoft’s employee email system last year — that’s 10% of the Microsoft global workforce. The higher-ups are not pleased, especially since Microsoft released its reconfigured Windows Mobile 7, a.k.a Windows Phone, to its staff; reportedly the company has changed its mobile phone reimbursement policy to exclude devices running anything else.

Ballmer’s jackboot incident is unfortunately overshadowing Monday’s unveiling of new features of Windows Phone to a meeting of developers, but it epitomizes the frustration Microsoft must be feeling in playing catch-up. Lagging the iPhone by a country mile, Windows Mobile has been getting its ass kicked by Android lately in terms of mobile web access.

The new operating system, first introduced at the Mobile Web Conference in Barcelona last month; has been designed from scratch and features a fresh Zune-like interface. HTC and LG are planning to introduce new devices with the OS just before the holiday season and a yuletide marketing blitz — though something tell me Microsoft is going to skip teaming up with “Family Guy” this time.

While some Microsoft employees continue their forbidden iPhone love, developers at the meeting came away nodding their heads.

“As a technologist, I’m pretty impressed by the complete story from design to development,” said Matt Joe, VP of technology for digital agency POP and Adotas’ inside man. “My teams will be able to make our customers’ dreams come true very quickly using the tools that they are already used to and that are only getting better with the next releases.”

Here are some more notes from Joe:

• Big focus on developing apps using both Silverlight and XNA — amazing hardware acceleration in the phone results in very responsive and immersive applications
• The developer tools not only target “developers” but also designers. Designers can build Windows Phone applications in the Expression Suite tools — it was very intuitive.
• The emulator is amazing — you can use your touch-enabled laptop or monitor to interact with the virtual phone on your screen. This is the first I’ve seen of that.
• Silverlight applications will make heavy use of web media — video from Netflix was stunning, integration with social networks is great. The “hubs” for pictures/videos and the other ones make application integration very easy. Apps are very integrated with the platform itself.
• Rapid development is the key here. You can go to market with these applications using different technologies and skills — all of this is typical Microsoft.

Joe did lament there was no news on the Xbox front, just a one-minute demonstration of a game during the keynote.

The widget will be launched with movie content courtesy of Fox Home Entertainment – and using the Windows Live services will significantly increase iBloks’ reach, the company says.

“Premiering iBloks Video Messenger widget that includes access to over 300,000,000 Windows Live Messenger consumers unleashes a powerful widget that enables our fans to easily IM each other and watch videos together. By making their lives more interesting and providing convenient access to amazing content from films like Alien Versus Predator Requiem we are delivering on our commitment to entertain and delight fans,” said John Cosley, Director of Digital Marketing at Fox Home Entertainment.

The widget can be deployed on a web page, as a video ad or as a gadget on sites like Google , FaceBook and other social network sites.

The court upheld the decision that was made in 2004 against the company and will fine them $689.9 million. A lawyer for the company said that the ruling will affect how they market future products; while Neelie Kroes, the EU Competition Commissioner stated in Reuters that the firm should see a “significant drop” in their current 95% market share.

Kroes said in a news conference that, “The court has confirmed that Microsoft can no longer prevent the market from functioning properly and consumers are entitled to benefit from choice and more innovative product.”

The case focused primarily on the applications that were continually released by Microsoft to only operate with Windows. British competition lawyer Chris Bright also said to Reuters, “It’s clearly a major defeat for Microsoft. There is no doubt it will spur the Commission on to regulate Microsoft much more significantly.”

Microsoft is declared by the ruling to give coding or any other pertinent information to their rivals in order to allow Microsoft product to run with other servers than Windows.

Brad Smith, Microsoft General Counsel told the conference that the firm will fully follow their new sanctions and that the company has not decided whether or not to appeal.