First off, Microsoft has done a lot of things right. The Xbox 360 is the crown jewel of the empire right now, and it demonstrates that careful thinking and passion can create something truly great. I don't think you'll find a single person who owns one that will say it sucks. It's easily the most impressive piece of consumer electronics I've ever owned.
Then there's Visual Studio and ASP.NET. It took a few years to get there, but the 2005/2006 products are everything I've ever wanted in a development platform (well, as long as you don't count the embarrassing state of the Web unit testing that I bitch about frequently).
But on the dark side of things, they've been stumbling around. Windows Vista has become a nightmare with the constant slipping ship dates. As a recent convert and believer in OS X, Vista is a much needed step in the right direction, but it feels as if it will never ship. Seeing as how the OS (and Office) are what really pay the bills, it's not comforting to see this downward spiral.
Then there's the mess in marketing. It started with the over-use of ".NET" on every product name, and it just keeps getting worse. Who the hell knows what they're even about anymore. It's so hard to understand as a consumer why Microsoft exists, and why it's good for me. It's not easy as a business customer either.
It's funny though how there's such a stark contrast between the good and bad. The company is just so damn big. I hope they can get those smart people in the right places to save the parts that have been such a disaster.