Microsoft’s core problem is that they have lost the hearts of computer enthusiasts. Regular people don’t think about their choice of computer platform in detail and with passion like nerds do because, duh, they are not nerds. But nerds are leading indicators.
In some ways Microsoft seems to be getting more exciting again. Whether it is the good early reports of Windows 7, Project Natal, their Yahoo! search deal, the XBox’s continuing strength or their Bing search engine, things appear to be happening for them again. Nevertheless, they have just posted some very poor results, and there are still plenty of questions about their business strategies. The problem they have, is that whatever they do, Windows is their life-blood. Take a look at John Gruber’s take on Microsoft’s Long Slow Decline.