Microsoft could sit behind their Office/Windows/Exchange moat and lob millions of dollars of cruise missiles at them for a decade until they could get it figured out. A competitor who has nothing to lose and a huge source of profit is exceptionally dangerous. They could afford to lose money on Xbox until it worked because unlike the others, this was a hobby for them.

The XBox was subsidized by the profits from Windows & Office.

Surface is an attempt to stop the losses to other tablets and smartphones. If they don't fix the problem, they won't have years of extra profits to wait for the Surface to gain a footing and shore things up.

Think about the difficulty of switching from a PS2 to an Xbox in 2001 versus switching from an iPad to a Surface in 2013. The garden walls are much higher today.