Maybe good for them, maybe not. Dunno.
It seems like a defensive move, though. XBox seems to be in danger already (what with the always-online fiasco, etc.) - bringing it inside seems like a good way to crush it even more. They're flailing around while Apple continues to eat their lunch.
They'd probably do better if they forced Ballmer out and maybe even thought about breaking up the company or spinning off big chunks (like XBox) while retaining some ownership stake. It seems like they're still acting as if they're entitled to the whole of every market they play in even though they are using friendly buzzwords...
Cheers,
Scott.