What you describe is Microsoft doing the absolute least they could do to accommodate their users who wanted to get online. Things like making the technology a little easier or having Word export to HTML -- I don't consider this "embracing the internet". I don't see how these can be considered as changing the direction of the company. The direction of Microsoft was not changed at all. Their cash cows were the Windows OS and the Office Application Suite before the internet got big, and those products were still the main focus and direction of Microsoft afterward.
40% of the Web sites on the Internet run on Microsoft's IIS, according to Netcraft...
This takes me back. My roommates and I spent a year in college trying to get a browser to work on Windows 3.11 for Workgroups. We failed. I had to wait until Windows 95 came out the next year to get on the damn Web.
who remembers trying to get on the internet with win3.1? it was abysmal. it had either horrible tcp/ip support or none at all, i can't remember which. everybody i knew bought trumpet winsock. all microsoft would have had to do, to follow its usual modus operandi, would be to go on pretending that the internet didn't matter. but then win95 came out, and it's tcp/ip support was outstanding. it was actually easier to set up than the unixes of the day. and its various office apps gained the ability to export to html, amongst other internet-friendly advances.
yes, internet explorer is stagnant now, because it no longer serves any purpose for ms to improve it. netscape is already dead, after all.