Wasn't really a "rest on their laurels" situation;
I mean...
-Got caught with their pants down in regards to servers
-Got caught with their pants down in regards to Phones (Palm/Blackberry)
-Tablets were chasing Blackberry for a while (IIRC)
-Tried to reinvent Windows for each use case separately instead of one-size-fits-all (or at least that's what my recollection is)
Business-wise: They didn't really need to panic due to Enterprise and Office strangleholding money for them. But you can't say they didn't rest/asleep at the wheel for future tech.
I'd say the X-box (and Surface) were worthwhile investments for them. But the X-box was a huge money-loss (and the later 360's sort of was?, X720 defo is), and the Surface is getting competition with MacBooks (for those that don't care about hybrids/touch) and convertables that might be cheaper for those that only want a touch-screen-laptop but don't want to pay a "premium" for it (the type-cover, stylus, etc).
But MS themselves? Weren't doing too much. Partially because of the anti-trust case, but also because they didn't "look forward" in a way.