The real issue was MS deciding to design, and therefor own, the chips used in the 360. Even a seasoned hardware manufacturer like Sony wasn't stupid enough to take that on, they partnered with IBM to do most of the heavy lifting. They are a software company, and developing software is very different from manufacturing chips.
The article sure made it sound like the classic case of marketing making too many early decisions, as in picking a small curved case, then forcing engineering to figure out how to pack it all in.
I'm still pissed that they kneecapped this entire cycle by releasing a console without a hard drive for cost purposes.