And there's the answer right there.
MS has come to believe that the only way it can succeed is by leveraging their existing monopoly into other markets. This is why refuse to look at doing anything that isn't tied to Windows in some way.
But if you look at their track record then it's probably true. I can't think of much else that has worked outside of Windows other than the XBox. The problem is that it took years and billions for the XBox to make a profit, and Balmer probably doesn't believe he has enough time to make that happen again.
So the best thing is to try and shoehorn the monopoly into a smaller form factor. Keep the whole thing together and hopefully keep the whole thing turning a profit.