If this information is only allowed to be given to the government then this is a non issue, which is exactly what's happening.
Mandatory Disclosures we may access, disclose and preserve your personal information, including your private content (such as the content of your emails, other private communications or files in private folders), when we have a good faith belief that doing so is necessary to:
(1) comply with applicable law or respond to valid legal process from competent authorities, including from law enforcement or other government agencies;
(2) protect our customers, for example to prevent spam or attempts to defraud users of the services, or to help prevent the loss of life or serious injury of anyone;
(3) operate and maintain the security of our services, including to prevent or stop an attack on our computer systems or networks; or
(4) protect the rights or property of Microsoft, including enforcing the terms governing the use of the services – however, if we receive information indicating that someone is using our services to traffic in stolen intellectual or physical property of Microsoft, we will not inspect a customer’s private content ourselves, but we may refer the matter to law enforcement.
They are obliged to give information to the correct authorities should they come across something worth giving to them. The rest of the data just goes straight to Microsoft.
also
Mergers and Acquisitions If we decide to sell, buy, merge or otherwise reorganize our businesses in certain countries, this may involve us disclosing personal data to prospective or actual purchasers and their advisers, or receiving personal data from sellers and their advisers.
microsoft can give away data to other companies should they sell pieces of their company to someone else. So no the information does not just go to the government or themselves, it goes to whoever they feel like.
Second of all, you can have all the protection you want, some script kiddy or hacker will find a way around all the protection Microsoft put in place.
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