Frankly, from Microsoft's perspective, the danger may have been overstated. Though the free open source crowd talks a good fight, the truth is that they keep missing the real target. Instead of investing in new features that nobody will use, the team behind OpenOffice should take a page from the SoftMaker playbook and focus on interoperability first. Until OpenOffice works out its import/export filter issues, it'll never be taken seriously as a Microsoft alternative.
More troubling (for Microsoft) is the challenge from the SoftMaker camp. These folks have gotten the file-format compatibility issue licked, and this gives them the freedom to focus on building out their product's already respectable feature set. I wouldn't be surprised if SoftMaker got gobbled up by a major enterprise player in the near, thus creating a viable third way for IT shops seeking to kick the Redmond habit.