Seems a bit of a lose-lose for MSFT and OpenAI, even if best that MSFT could do to contain the situation. Competitors must be happy.
Competitors should be fearful. OpenAI was executing with weights around their ankles by virtue of trying to run as a weird "need lots of money but cant make a profit" company. Now they'll be fully bankrolled by one of the largest companies the world has ever seen and empowered by a whole bunch of hypermotivated-through-retribution leaders.
The leaders may be motivated by retribution, but I'm sure none of leaders or researchers really want to be a division of MSFT rather than a cool start-up. Many developers may chose to stay in SF and create their own startups, or join others. Signing the letter isn't a commitment to go to MSFT - just a way to pressure for a return to status quo they were happy with.
Not everyone is going to stay with OpenAI or move to MSFT - some developers will move elsewhere and the knowledge of OpenAI's secret sauce will spread.