Its engineers have not necessarily proven that they can ship software on time. Maybe Microsoft needs less heroic engineering and more of a business focus.
Windows is Microsoft's biggest business unit, and Vista is it's biggest challenge. Frankly, I think it's going to be very difficult for Microsoft to make its case to corporations.
He has his good days and his bad days. He still sees friends. Company is good for him. He is still signing books. But he is not able to conduct any business or make any speeches.
There were political problems and technical problems. The two divisions have different business incentives, and the company, knowingly or unknowingly, set up a situation where their business incentives were not the same as their technology incentives.
If you look at Microsoft's two biggest businesses, Windows and Office, they don't have an obvious Web 2.0 play. But the server and tools business at Microsoft has a vested interested in making Web 2.0 work, and they have a strategy to do it.
Microsoft's server and tools unit has proved they can take something like Web 2.0 and make it easier to program for. It has a very viable business model there.
Microsoft's engineers have been griping about too much bureaucracy, and this reorganization runs counter to it. It is bound to cause some discussion among employees as you are essentially putting a business manager on top of a very technical group.
This is Microsoft talking to businesses about why it's a good IT vendor and particularly why its different from IBM.