I can see Silverlight perhaps finding a niche in internal application development - but that's a pretty big come down from the original goals of the technology (i.e. a Flash killer). So wouldn't that make Silverlight, if not dead, severely wounded?
It would mean Microsoft has realized that competing for Flash's position is not worth the fight, effort or money as Flash and its position in general (plugin-based web-solutions) is losing grounds every single day. They are not willing to fight a battle which will eventually be lost anyway.
They are simply refocusing their efforts to get Silverlight (which is a pretty good piece of engineering IMO) put to use elsewhere.
As far as I can see, that is a pretty good strategic decision.
It's another way of running rich functionality in a browser. It might be advantageous in some situations to solve uncommon difficulties with distributing UIs. It won't necessarily be a tool for the common case.
Er,its liking comparing Flash with Amazon EC2, I'm sure you're thinking that Azure is something else
Silverlight and Azure are different things, but they're both marketed towards developers who would like to take functionality, much of it in the form of internal apps, and make it accessible on the web or otherwise over WAN. I know this, because some Microsoft folks were pitching Azure to me just yesterday!
Yes, things don't make sense if you're stuck on "compete = comparable." A little reflection, and you should realize this isn't a very good assumption. (Teleconferencing and airlines, anyone?)
Teleconferencing and airlines solve a common problem, but what common problem do Azure and Silverlight share? They've got basically nothing to do with each other, except for as you say, that they're marketed at developers (?)
