The term "existential threat" refers to things that threaten your existence. For the last 30 years, nothing has threatened Microsoft's hegomony over the desktop. The Internet didn't. Thin clients didn't. Java didn't. Linux desktops continue to be horrid. The Apple desktop is good enough, but only in the high-margin niche.
But a better Windows than Windows was never going to be a threat. That's not how technology works. Once you dominate a market, nobody is going to rise up and challenge you. Instead, the only threat is that your market becomes obsolete.
That is the subtext behind Bill Gates' infamous "Internet Tidal Wave" letter of 1995, recognizing that the Internet was going to destroy Microsoft, unless the company could completely turn around their business. They did, which is why Microsoft has survived for or the last 17 years. Their stock price was around $4 a share when Gates wrote that letter, and is around $30 today. It's also the subtext behind Microsoft's own existence, as the personal computer destroy all prior computer companies that built "mainframes" (even IBM's stockprice went negative at one point, being worth less than its assets).
Buy Microsoft's stock has continued to be at $30 for the last decade. While they succesfully capitalized on early Internet growth (mostly by tricking corporations to use ActiveX), they have failed in later Internet growth. Today's Internet is very differetn than the Internet of 5 years ago, which is different than the Internet of 10 years ago, which is different than the Internet of 15 years ago.
Today's, there's no good reason for the "desktop" computer. Fewer and fewer people are installing new Windows applications. The market has moved to the web (where thankfully, ActiveX is quickly disappearing), to mobile devices, to social networks.
That's why Microsoft is moving boldly to counter the threat to their business. The next version of Windows is designed primarily to be a pad operating-system with the "Metro" interface using touch, with the traditional "Desktop" interface as an option for old geezers who still want to use a mouse and a keyboard. That's not to say the keyboard/mouse aren't necessary, but that that they will be an adjunct to the primary touch interface, and not the primary interface themselves.
Microsoft needs a "Metro" tablet as part of this, but they are stuck. The high-end is dominated by Apple, who builds a luxury product by obsessive conrol over the hardware. The low-end market is dominated by Android, which Google gives away for free. There is no place in the middle for Microsoft to charge for an operating system. Hence, their bold move to deliver a product that competes with Apple on the innovation and quality of the hardware.
Many are praising/criticizing Microsoft, predicting that they will fail/succeed. I find that an uninteresting debate. Instead, what I find interesting is that the iPad/BYOD/cloud is an existential threat, and discussing the few options open to Microsoft, before it goes the way of Nokia and Blackberry.