If you are just looking at the numbers, then it really feels like they did well. But if you are looking at what they had going for them, or what they could have achieve then yes it feels like they under achieve.
At the start of the year everyone knew that with Halo coming in October and Xbox usually win the holidays season, the holiday would have belong again to MS, but PS4 would have put up a fight and not lose for the same 700k they did last year for November December. But it is not really MS that fucked, it is more like Sony step up big time. With they market share, Sony was able to secure key holidays bundle, had a price cut, actually really had a sales for Black Friday, and even gave a sales for about 2 to 3 weeks in December. Sony was aggressive and that took away sales from Xbox One.

I would rather rebuy a nintendo wii (not u) with the top 10 games instead of giving micro$oft 1 more of my hard earned money.

I think Microsoft simply stopped being desperate. They now have recovered from the major fuck up in 2013 and are working on getting their shit together. Part of that is to just accept that they lost this gen for good. So instead of concentrating on beating Sony, they try to make the best out of the situation and generate profits where they can. They do that pretty good, I would say. I mean, they certainly have the money and could go on an all-out war against Sony, buying exclusives left and right and making timed deals and whatnot. But it's just not worth it. Even if they could turn things around with an investment of 10 billion dollars or so, it would be a pyrrhic victory.

1.2 MIL is not a bad strategy

they did pretty good but got overwhelmed by Sony marketing force

Exactly. Agreed 100%.