Even if it was to be sold at a deal, this is the US army we are talking about and an American company. I can't think of worse press than having some pundit come out and say how MS hates America by refusing to sell them something that could help train America's soldiers. A foreign company could get away with it, but not an American one. And I mean I know capitalism doesn't do much for national pride out of corporations (despite far right conservatives thinking otherwise) but I still wouldn't take the risk of the bad press if I were them.
However, I do think their reasoning is solid, but as I STRONGLY know, an appeal to logos isn't always as effective as it probably should be.