That's just one employee, not really a fair representation of MS upper management nor Gates specifically. I've seen interviews with Bill Gates in the mid 90s where he talks about a long term plan for subscription software over the internet (specifically regarding Office if I recall correctly). That's two decades before Office 365.

Let's also remember just how deeply Internet Explorer 4 integrated into Windows 95.

Microsoft were very aware of the potential of the web but that still doesn't mean they could control it.