It would be a PR disaster for Sony. The bean counters are getting what they deserve.
The way I'm interpreting these statements, like the ones about an Xbox handheld yesterday (and this is with taking them on good faith i.e not being slimy to use the Apple lawsuit as a piggyback against console platform holders), is this being Microsoft's way of pivoting the entire business model for Xbox.
And by that, I mean basically making their business model like that of PCs and PC gaming devices, so they're gonna be running Windows and have an Xbox gaming UI frontend. That's why Phil was talking about an "Xbox-like UI experience" when bringing up the handheld stuff yesterday, but they'd have to work with the Windows team to seamlessly integrate that (and probably have it deployable with some future Windows distro).
That way they just basically have console-like PC gaming devices running some form of Windows with an Xbox UI that can also boot into the normal desktop environment or whatnot, on some design spec scalable on their end and modular on the customer's end depending on the specific form factor type (i.e a mini-PC NUC Xbox would have more options for modularity & scaling than a tablet Xbox). And the devices are going to be priced to have sizable profit margins upfront (so cheaper ones might go for $199 - $299 and expensive ones might go for $999 - $1299 or whatever depending on certain specs).
As for the design spec they'll probably take a console-like approach but have separate CPU & GPU, different memory types for some device types (maybe CAMM memory for a tablet for example), and CPU/GPU scalability coming from upclocks/downclocks and physically smaller GPUs with less shaders (would require suitable chiplet GPU designs), modularity coming from swappable PSU, cooling, system RAM upgrades, installable low-profile GPUs etc. depending on device form factor.
Plus this way they could keep volume production more manageable and scalable along the pipeline, and update the design spec blueprint every 2-3 years or whatnot. Just for example, MS are tracking to sell maybe barely 4 million Xbox Series consoles this year, and lose money on every single one. For a traditional console, those are terrible and unsustainable numbers. But for a line of gaming-centric PC devices selling for good profit margins each unit? Those would be very satisfactory & sustainable numbers. And if the products are appealing enough, they'd probably be doing a lot more than 4 million in annual sales, given the growth PC gaming has been seeing over the years.
Theoretically Valve could be doing these same things and they kinda are with Steam Deck, but Linux has nowhere near the market share of Windows, Valve don't have a widely used SDK or API library for PC game development, and they don't have the scale of hardware production at volume Microsoft has had with Xbox. So there's an opportunity for Microsoft on that front but they have to (finally) give up the idea of trying to "beat" PlayStation and Nintendo.
And do so in a way that isn't them trying to slyly upend the traditional console business model for companies where it makes 100% sense just because Xbox has failed with that business model. Hence why I'm trying to look at these developments in good faith.
It would be implemented through Xbox becoming a PC brand, so that PC games can run on it, and giving up any pretense of taking a 30% cut of everything. Basically they give up and lose all the benefits of platform ownership in order to make it look like they're not dead.
I mean that is basically the direction they seem to be heading, but the good news for MS is they have enough vested interests in PC to make that transition actually work IMO.
They just have to avoid "phoning it in" with that shift and, well, there's always the non-zero chance they completely phone it in and fall on their faces while Valve, Asus, Lenovo etc. continue to make gains in the PC gaming market.