Exactly one year ago today, Microsoft launched the Xbox in the US. The Seattle megacorp said that it was the most powerful console on sale and that it would revolutionise the gaming experience. But the public said it was bloated, ugly and overpriced. Sales were lacklustre.

The Xbox suffered an even more problematic birth when it launched on March 14 this year in the UK and Europe. Sales hovered between minimal and non-existent. A mere six weeks after launch, Microsoft slashed the price from £299 to £199 (it now has an RRP of just £159), which improved matters - but the console hardly looked like a credible threat to Sony's PlayStation 2, currently celebrating sales of three million in the UK alone.

The latest figures by sales monitor Chart Track show that 233,500 Xboxes have been sold so far in the UK. That sounds unimpressive (particularly when you consider that Grand Theft Auto Vice City for the PlayStation 2 sold 250,000 copies on its first two days on sale in the UK) but, nevertheless, Microsoft is crowing. That is because the Xbox has overtaken Nintendo's GameCube, both in terms of installed base and "run-rate" - the week-on-week retail sales (currently, around 10,000 Xboxes are being sold each week). Xbox, at least, is winning the race of the also-rans.

Chris Lewis, Microsoft UK director for home and entertainment, is bullish. "We're happy to be a clear number two," he says. "It has genuinely been a rollercoaster ride, but now we have clear momentum. We will see a lot of energy from the retail sector and key bundling activity between now and Christmas. We have a few tricks up our sleeve."

Lewis points out that around 200 Xbox games will be in the shops this Christmas, which is impressive, but there is still a sense that the console could do with a few more killer exclusive titles.

Lewis fingers the innovative platform effort Blinx and Ubi Soft's Splinter Cell as key games, and cross-platform efforts like Tony Hawk's Pro Skater 4, FIFA 2003, Harry Potter and 007: NightFire should also help. But clearly, we can expect Microsoft to unleash an almighty marketing and advertising blitz any day now.

At its X02 showcase (held with much razzmatazz at a theme park in Seville on September 24), Microsoft announced it had bought legendary British developer Rare Software from Nintendo for an astonishing $375m.

Although the amount paid was excessive, the move provides conclusive proof that Microsoft is in the games industry for the duration. And as Rare is an old industry stager, it makes Microsoft look less like an arriviste.

Lewis is also keen to extol the virtues of Xbox Live, the online gaming service for the console due to launch on March 14 2003. Xbox Live is technically impressive, and will arrive at a time when the likes of BT are beginning to become serious about making broadband pervasive. It also has some compelling games (such as Unreal Championship and, eventually, Halo 2).

All these factors should enable Microsoft to take a lead in the burgeoning online console gaming world - provided the service, and the Xbox, remains out of the clutches of hackers, which Microsoft is adamant it will.

So, despite its painful birth, the Xbox has finally established itself as the number two console behind the unassailable PlayStation 2, and Microsoft has convinced pundits that it will not withdraw from the games industry like a wounded animal. Evidence even exists that the company is looking further ahead than the Xbox: persistent rumours suggest that Xbox 2 developer kits will shortly be delivered to key developers, and J Allard - the originator of the Xbox - has gone on record saying that Xbox 2 will arrive before PlayStation 3.

And that exposes the Xbox for what it is: a holding exercise designed to gain a market foothold, allowing its successor to compete on an even footing with Sony's next offering.