At this point, MS is making money in the OS and Office space solely on inertia: it's not as if there's anything truly compelling going on there. Calling Vista the "Windows ME of 2007" is pretty harsh, but I think Dvorak gets this right:

Microsoft has extended the life of Windows XP because Vista has simply not shown any life in the market. We have to begin to ask ourselves if we are really looking at Windows Me/2007, destined to be a disdained flop. By all estimates the number of Vista installations hovers around the number of Macs in use.

The problem is simple: MS has gotten way, way too big. From what I've heard, the team working on Windows numbers in the thousands all by itself - which is likely most of the problem right there. Microsoft has tried to be all things to all people, and I think it's starting to bite back now. Their revenue numbers are solid, but they are losing influence - and at some point, like IBM in the 1980s, that loss of influence will translate into a loss in revenue (relative to their size).

If they were smart, they would break the company into multiple pieces, and let each one try to get back to being lean and hungry. I don't expect to see that anytime soon, though.

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