Legacy, bad image and dumb (bad!) marketing.
I think those are the main problems with Microsoft right now. And personally I think its quite unfortunate because in my opinion a lot has changed over the years with the company and their products. Not all for the better, sure, but in many fields they have made quite some progress and are actually providing quite a fair service.
The main issue here is that I don't think Microsoft realizes how far and deep a legacy can go and continue. Example; Sun's Solaris. This was my favorite Unix environment. However, quite often this is still mockingly referred to as Slowaris, even though Solaris 10 was by far the product it once was. Heck; even the mock wasn't totally fair because its not if Solaris couldn't cope or anything. No, you needed to actually get your hands dirty and tune the critter. Once that was done you were home free. Obvious problem: you had to know what you were doing. And no; cool gadgets like DTrace weren't available back then. Yes, I am generalizing a little here.
Yet myths like this still live today, even though we're talking about a very specific market.
NOW imagine a market which Windows covers. A mixture between more technical people and total computer illiterates. Raise your hands if you can still recall the funny Windows 98 introduction: "You'll notice that this scanner build.. whoah!" .... "...Moving right along! <nervous grinning>". "I guess that's why we're not shipping Windows 98 yet.."
Users who lived BSOD's a few times will be very hesitant if they need to abandon their proven stable environment for something... "Hopefully just as stable". Enter your bad image.
Now, I am biased here. As a small business user I've switched from Ubuntu LTS & OpenOffice to Win7 & MS Office 2010 and so far I'm quite pleased with the change. It helps that I'm a geek, but still...
Yet it amazes me how little attention Microsoft pays to things which really matter to quite some people. For example; "Why Windows 7?". Check the official "10 reason sheet" yourself here: http://windows.microsoft.com/en-US/windows7/products/10-reasons-to-buy-Windows-7. "Better desktop", "smarter searching", "better wireless networking". Haven't we heard these things before? Like with every previous Windows version when it was released?
Then notice how Microsoft tries use the "emo approach" (as I call it) to promote Windows 7. "Its great to be a family", "Have more fun", "Reinvent family night"....
Honestly; they should use that approach with their XBox market, not with Windows 7 where a majority of people (IMO) sees Windows as a tool and not as a goal. With this approach a lot of people have no idea about some of the (IMO quite high) potential of Windows 7.
For example; in my direct surroundings (all Window users) very /very/ few people know about the "Previous version" option in Windows 7 and Vista. Meaning: removed a file from a folder and suddenly discovered that it was 1) Gone, 2) /really/ gone and 3) Your backup wasn't as great as you expected ?
Windows 7 has you covered. Go to the parent folder, get the properties of the folder your file was in and then check the tab "previous versions". Changes are high (depending on your environment of course) that it can still be recovered. Even 3 weeks after the facts. (and yes; you can also turn the whole thing off if you want to).
Most of my customers have (had) no clue about this feature while in some cases it really saved their skin /big/ time. Yet to my knowledge this feature was also never marketed by Microsoft, while it can actually be a life saver.
Office? IMO they are trying, when looking at their Office blogs or their youtube video's.
But same applies: I recently discovered Outlook's "Business Content Manager" by *accident*. Check the Outlook product pages yourself; you won't see it mentioned directly while in fact it can skyrocket Outlook's functionality for small businesses. Worse: MS knew about this, the MSDN blogs for this product hold /many/ questions and complaints about "I used it on Office 2007, where has it gone to?!" and such. People wanted it, badly, and MS goofed up at first by not including / providing it with Office 2010 (only on volume licensing, go figure!) and only some time later saw their error and corrected this mistake. Now its available for free for Office business users. And ironically enough aimed at smaller business like the one I represent.
Too little, too late! And a rotten shame too, to me BCM proofs to be invaluable. It replaced my previous CRM (19 customers and rising, in the middle of some big projects here) in 1 (long) day.
How many of those disappointed BCM fans I mentioned above will have peeked at Google back then ? Just like I started checking out MS Office 2010 after OpenOffice blew up in my face?
Microsoft marketing? The first thing which pops into my mind with that phrase is seeing Ballmer running and screaming like a madman on stage. "I love this company". Of course you do; it provides your paychecks!
MS needs to learn how to deal with competitors which cannot be bought and assimilated and actually /think/ about their marketing strategies.