I want to hear Microsoft's side of this.

Sadly, what passes for journalism these days is mostly just an insult. The link provided in the op grossly misquotes the information in the actual article, probably just for hits and sensationalism.

Here's a link to the source: http://www.oxmonline.com/article/features/-mag/next-box?page=0%2C0 the quote in question is on page 2.

Reading blogs as news on the internet, makes me worry for the future of humanity.

Nvidia screwed MS over so they dropped them.

This gen they screwed over Sony so (rumour) all three consoles will be AMD next time.

@Soleron
how did Nvidia screw Sony over exactly?

I very much doubt this TBH...but if this is true I would be sooo happy!

1. Because the GPU they showed up with was slower than the Xbox 360's GPU (from AMD) but was not cheaper to license
2. Because failing G8x GPUs in laptops cost Sony millions of dollars in refunds and replacements
3. Because Nvidia's Tegra that the PSP2 was meant to be based did not fulfill the performance and power consumption numbers Nvidia promised so that design had to be scrapped and redone leading to a significant delay in its launch date. Sony clearly wanted to launch before the 3DS.

Can you provide any sources for all this?  Especially point 3?

(1) just because the PS3 GPU is inferior to the Xbox 360's. I think it follows that Sony don't want to be second place in graphics horsepower next gen.

(2) http://www.nvidiasettlement.com/ and it affected Vaio laptops

(3) http://semiaccurate.com/2010/07/14/sonys-psp2-powered-nvidias-tegra-line/

3 is from a rumour site but I trust Charlie and his inside information on all things Nvidia has been genuine so far (particularly Fermi, the G8x failures which he was the first to report on and Tegra missing targets). He said AMD would get all three consoles' GPUs as well as their launch timeframes over two years ago (actually he said the PS3 GPU would either be Intel's Larrabee or if they messed up then AMD. They did mess up).

Hey AMD...

...just don't.

Yeah, this. Even as VGChartz biggest AMD fanboy, this even made me facepalm.