I knew this would happen. Too bad. M$ should not be allowed enter any other industry. They have too much influence and too much money. The gaming industry (or should I say the console industry) will become just like the PC industry today, even worse, as you don't have middle parties like OEMs involved, just M$. Those who think this won't happen, well, just wait and see.
Here's how it goes:
1. Microsoft use their influence from the PC monopoly and extend it to the gaming industry
2. They steal PS2 titles and make them exclusives to xbox
3. They pay companies to develop their games only for xbox
4. They buy the companies and they (of course) have them develop their games only for xbox. They also aquire their techniques etc. for games.
WHEN (not if) the xbox reaches popularity
1. Games will be devloped M$'s proprietary Directx standard; games will not be portable to other platforms, such as PS2 and GC, or not as easily. Porting games, even if the companies wanted it, becomes impossible (third-party game famine for competing consoles).
2. Gaming companies will be forced to develop their games with M$ and xbox; M$ will also have ownership over the game. Would protective companies like EA support this? They'll have no choice. xbox is the most popular console with the most games and most users, they can't afford not to. And the gaming companies submitting to this will only contribute to this.
3. The result is competing companies can't compete because all the gaming companies are either owned or influenced (and paid) heavily by M$, so they get no third party games.
I don't doubt for a second that this deal isn't going through. That is unless some antitrust case doesn't prohibit them from it.