Microsoft acknowledges the Apple threat in SEC filing

In their mandatory 10-Q filing with the US Securities and Exchange Commission for 2008 Microsoft acknowledges Apple's success, but without mentioning them by name.

A competing vertically-integrated model, in which a single firm controls both the software and hardware elements of a product, has been successful with certain consumer products such as personal computers, mobile phones and digital music players.

Microsoft does, however, mention that it has two "vertically-integrated" products (the Xbox 360 and  Zune) but that producing more may "increase [its] cost of sales" and "reduce operating margins."

(Tip: AppleInsider)