Microsoft never seeks to put its competition out of business. It wants them there
1. As monopoly insurance
2. As a source of ideas to copy
What they do seek to do is ensure that all their competitors operate on the same business model as Microsoft. i.e. writing and selling software with periodic incompatible upgrades that force everyone to buy their software again and again. This is the model Microsoft spent 30 years building monopolies to support, and they know they can win against anybody else operating on this model. But the internet has thrown some big wrenches into it
Open Source bugs them, but since it generates no serious direct revenue, they have a pretty easy time fighting there. After 20 years, OpenOffice still hasn't put much of a dent in Microsoft's software revenue stream. Microsoft can keep prices just low enough to make the free stuff just incompatible enough to be not worth the bother to most users - or at least most users that are willing to pay for an office suite. And a big advertising and lobbying budget doesn't hurt when the competition has neither.
On the other hand, Google perfected the advertising-supported software model. Their model makes tons of money, and when used to fund loss leader free software, it drives Microsoft nuts. Google Docs doesn't hold a candle to OpenOffice functionality or price-wise, but it was enough to bring Office 365 into being. And that's Google's general direction - show that it's possible to compete with even a behemoth like Microsoft when you adopt the web-based paradigm. Web-based apps are probably not as 'good' as desktop apps, but the ease of deployment makes them a win in many cases nonetheless. And then there's Android. The first application of this model to become a viable platform competitor to Windows. Google must be stopped!!!! iOS was never a threat. Apple could keep it's 15% market share, while serving as Microsoft's R&D department. That was the old model, and it seems pretty quaint today.