This feels more like an internal turf war inside Microsoft. The general open source strategy with .NET Core and VS Code has been running long enough that I don't think it's just a smoke screen. But there's probably plenty of different interests inside Microsoft that are at least partially in conflict.

The Azure side probably doesn't care about selling Visual Studio, but they care about developer mindshare and reputation. The Visual Studio side seems to be in a more difficult position, I assumed they can just live from the enterprise/everyone else split and focus on enterprise-y stuff to still sell Visual Studio. But it looks a bit to me like VS Code and the .NET cli have become more of a competition than they'd like.

And the worst mistake here might not have been pissing off the .NET community, but pissing of the people working on .NET for Microsoft. I mean in the end this is the same, but pissing off the people working on .NET would result in a much more thorough destruction of trust with the community in the end.

But I have zero inside knowledge here, might just be weird decisions driven by internal politics or whatever.