That’s disingenous. Microsoft themselves considered Linux a serious threat as early as 1998, as described in their own confidential memoranda. (AKA the Halloween Documents released by ESR.)
But even if the data point is not good to support the argument, I don't think one could argue that Linux succeeded by "being free". If Linux was a "serious threat" in 1998, it was because there already companies looking into it and willing to make back it up financially to help its development.