If they would've taken over Sega, they could have put their muscle behind the Xbox (since Microsoft was partially involved in Dreamcast development anyway), and that would have solved 2 of Microsoft's biggest Xbox problems: light first party support and Japan.
Keeping Sega on as a wholly-owned subsidiary (where Sega was still free to be Sega, but Sega profits/losses went to MS instead of investors) would indeed have been a bad idea, but instead making Sega the core of the Entertainment Device Devision would've been a big, positive thing

Monster Hunter: pissing me off since 2010.







