Yeah, Microsoft still won't accept that they don't control the Internet. They missed the boat on Web browsing, and that's basically the only area where they've managed to recover and dominate--and even that dominance has slipped in recent years.
They missed out on the rich Internet application niche, and then tried to push Silverlight as an alternative to Flash/Flex, even though Silverlight is shit.
They've not done too badly in the video game hardware market, although the current generation's situation is more due to Sony's constant fuckups and Nintendo's divergent market focus than anything Microsoft did.
If MS would stop making things that are just "good enough" and actually focused on coming up with products that were of excellent quality and functionality, they'd be able to get a foothold. They have never and probably will never be known as innovators, and they should just deal with that. The structure of the company doesn't really foster innovation. As with this Vine service, they see an idea they like and copy it, in the hopes that their version will become dominant and give them control over that particular application space.
It didn't work with Passport (now Live!), it didn't work with Silverlight, it only kinda worked with XBox. Twitter is way too entrenched for MS to knock them off the top. Their only hope is to do what they did with Facebook--buy a big chunk of it so they have a stake in its future.