From a Sony consumers viewpoint, I'll prefer if M$ stay in the market, it is the super player who can throw money like nothing, which gives immense pressure on Sony to innovate.
1) Without its excellent Live service, PSN wont be free
2) Without it to money hatting every 3rd party 'timely' exclusive, Sony wont have a super 1st party line-up
3) Without its super cheap but featureless, no rechargeable battery, no wifi, no hardisk $199 Arcade, PS3 wont price drop to $299
Yeah, i wont buy a Xbox, but I dont mind it giving pressure to Sony so I can have better product at a cheaper price.
Phone 7, lets see you give some pressure to almighty Iphone there, so Mr. Jobs wont be so cocky.