Microsoft have announced "Microsoft Live, and Office Live.":http://www.techcrunch.com/2005/11/01/windows-live-and-office-live/trackback In my opinion, it's all headed towards ubiquitous computing, and this is just the next step.
Microsoft's latest announcement is not as sensational as the ubiquitous world described below. However, I think you will find that integration on existing products, and leveraging the integration to expand their product/service offerings will be the crux of Microsoft's future.
The key to ubiquitous computing is seemless integration. The key to seemless integration is through *connectivity* (Internet, WiFi, WiMax, etc), and device *co-operation*.
Microsoft's market position gives them the unique ability to integrate a large percentage of a users devices. They have devices on your desk at home and work, in your palm, on your holidays and business trips (notebooks), and even in your lounge room (XBox, Media Center)! When all these devices are integrated, and that integration is then "leveraged":http://alexpooley.com/articles/2005/10/30/its-about-time to produce more products/services (E.g hosted collaboration), you will not want to use any other software package/service provider/company.
Interestingly it looks like they are playing with third parties, such as "Flickr's":http://flickr.com photo services. I'm curious to see how this plays out.