Nobody expected that Sky would prevail in this. I wonder what convinced MS to accept this and forgo appeal. A generic term like "Sky" sounds hard to trademark...but then again Microsoft has "Windows"...
A term like "sky" cannot be trademarked for all uses, but only those similar to the actual business.
Sky does not have an online storage business, as far as I know, but it does have various online services (internet video, gambling etc.) as well as bring an ISP.
Its enough to make it risky, and MS probably decided they did not want to put more time and money into a brand they may abandon - better to get a predictable transition.
Windows is actually quite an interesting one because of its use for windowing systems. I suspect if anyone wanted to throw enough money into arguing out they could win in court in at least some countries. That is what happened with Lindows - MS lost the case in the US but won in a number of European countries and then bought the Lindows trademark in the US. This is different from sky because of the prior use of "windows" as a name for software.