Metro AG owns Media Markt and Saturn[1], both sell electronics, including computers. Judging by their stores, most of these computers are PCs (although they do sell Apple computers as well).
Media Markt, is Europe's largest retailer of consumer electronics[2].
Saturn is one of the big retailers of consumer electronics in Germany, and have stores in some other European countries[3].
So perhaps Microsoft could have won that one, but at what cost? Pissing off one of their biggest retailers? I don't know for sure, but it seems very likely that Microsoft wouldn't want to do that and made the decision to back off instead.
[1] http://en.wikipedia.org/wiki/Metro_AG