Micro$oft as a whole is fine but the Xbox division got screwed because of 360.
They released a year before PS3 and X360 was easier to develop games for compared to PS3 architecture. They grabbed the momentum and became "the console" for several years.
RROD and using HD DVD instead of Blu-ray stalled the momentum and PS3 actually caught and passed them in sales by the end of the cycle. Sony learned from their mistakes and PS4 had no obvious issues compared to the problematic launch of Xbox had (console is "always on?").
People felt M$ and Sony were neck-and-neck in the mid/late 00s but it was more of a mirage. They couldn't hold the line and Sony went ham on exclusives. Microsoft has all the money but that was NEVER their issue. The "consoles don't matter" pivot only happens when you aren't selling consoles.
For us 6 figs/6 certs brehs, it doesn't matter because we own Switch/Series X/PS5....but console wars matter for the budget conscious folks that can't buy multiple machines.