... which is why I actually think they do not really WANTED to, sadly (and "Insanely" :)) enough.
When Microsoft doesn't want to compete they'll still do something to be disruptive. Like releasing things for free in hopes of destabilizing an established market.
They wanted to compete. They just didn't know how to do so while at the same time differentiating themselves enough to matter. They also recognized that simply throwing money at the problem was not likely going to change things in the short term.