Entertainment and Devices
well... sure the Xbox is great, but the rest of it... Zune is too little, too late to stop the iPod onslaught (maybe if they stopped trying to stuff features in and made it more useful... oh, and consolidated their media players on the desktop to just one); the current Windows Mobile crop are pretty crap compared to the alternatives and Phone7 will just be one of many and - like WebOS - too little, too late.
Windows Media Center has the potential to be great, but a PC doesn't interface that well with CableTV and offers very little over a TiVo because they have to deal with so many compromises (but features like the DVD Carousel support just make the media experience on the Xbox look less finished) and as for their MediaRoom product (what's that? you cry... exactly!)
If the best they have to follow on from the Xbox360 is Surface that's a group of people in trouble..
Google, Apple and even a "trusted partner" like HP are about to start eating into their entertainment story.
Oh, actually... they do make pretty good mice and keyboards.
Windows7, Office2010, Visual Studio 2010.... these are examples of MS doing what it understands and executing well. They just don't have the right leadership or outlook for Entertainment. They should sell that group to Logitech (or buy Logitech and operate it as a seperate unit with its old management)