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Microsoft was never any good at 1st party games development. Blame it on their internal MGS management, and their inability to attract talented game developers to MS, and then get them to stick around.

Microsoft has a strong 2nd party setup, however. They are good at business relations in this regard -- they should have done this long ago.

Microsoft 1st party == dead. Good riddance. Sad to see the studios they bought go, however. I would wager that Bungie knew this was going to happen, and, being passionate devs, that's why they opted to purchase themselves from MS, and instead become a 2nd-party studio (at least in the short-term). Hopefully Rare and Turn 10 will also manage to survive somehow.