I really think that Microsoft is at a point of strength at the point in the game. They have a very nice system that is expensive, but compared to the other system coming out, is very fairly priced. Their system has graphics that are beginning to truly look next generation and already has a large list of games that appeal to its core market (US gamers.)
Its too competitors are Nintendo and Sony. Sony has a system that is going for the exact same market and even strategy as Microsoft...yet the system is drastic price increase over the Xbox 360 which will hinder sales.
Nintendo has a cheaper system focusing on innovation, but with inferior graphics capabilities, Xbox 360s core market is likely to ignore this system.
So do I believe Microsoft is worried? No. I think they are definately going in for the kill. They are going to do whatever they can to stop Sony's new system from picking up steam.
And I don't even think Microsoft even cares if Nintendo is successful, because killing Sony will land Microsoft in either first or second place by a huge margin.