The commonly held belief at the time was that Microsoft's dominance rested in large part on that desktop software. Think how hard it would be today if you wanted to start a new mobile OS (let's call it "windows phone") years after entire software ecosystems have been established for iPhone and Android.
It's safe to say that Microsoft is not the shining star they once were. If we were to pick a single moment in history that lead to their undoing, I think this would be it.
> BTW if Microsoft didn't invent XmlHttpRequest, somebody else had done it.
"Somebody else" didn't have the market share IE did. Something that was incompatible with IE at the time was a non-starter. What's remarkable about this story is that when Microsoft saw the browser coming in the Netscape years, their entire strategy was to head that shit off by ensuring that their own browser become market dominant so that they could keep the web in a place that wouldn't hurt MS.
After all that effort, the anti-trust suit, etc, etc... and they'd gotten themselves in the place where they controlled the future of the web, it was some random developer at Microsoft itself that invented the very thing which was their undoing.