Wesner Moise asks this question. Clearly MSFT is a force to be reckoned with. They are making a huge investment to bring even more developers more solidly into their API camp, which is not easily emulated.
What I hope happens to Linux is that significant developers continue to realize that the linux core is solid, and that good systems should still be built in layers. Microsoft is bundling so much into their "core" for business reasons, it's a bet that may not pay off as well as hoped.
It's not good software, but it is great business.
And speaking as a software developer, as dispassionately as I can speak about something I am passionate about, there are precious few gems in what I have seen so far.
The two real gems to me seem to be Indigo and the Business Framework class library. Ironically these are two components that are the most independent of the "core".
The two primary losers seem to be WinFS and the whole XAML, Avalon stuff. Not that they are not aimed in a worthy direction, I just don't see a lot of bang for the buck.
The Linux and the Java worlds (they are still separate from each other) have the benefit of more freedom to innovate on *top* of those platforms.
The Longhorn core is too big and will suck too much energy just to begin to grok the complexity of the singular vision.
But I have never been good at business math. The strategy from a business perspective is sound. It has obviously worked in the past.
Economic forces to get or keep a piece of the rest of the pie should remain strong enough to promote innovation on the non MSFT platforms. I don't see others being plowed under so easily. There is too much wrong with Longhorn and too much incentive to compete.