Microsoft is building up to a digital streaming service, kinda like google just announced. They are trying to grow their audience before they pull the plug on the hardware side of things. I’m sure they still view the switch as competition, but right now the two companies have two different visions for the future...
I don't think they'll ever pull the plug on the hardware side until it actually loses them money, and more money than would be justified by the strength it offers the brand. Keeping it around allows super brand loyal fans to keep buying those consoles. It's low risk profit and keeps those loyal fans close. If Nintendo did something like this, I'd keep buying their consoles, but I'd imagine they'd start to sell at sub-WiiU levels. The same thing will likely happen with Xbox, but the brand as a whole will actually be bigger and stronger.