Never one to avoid an oportunity to have a dig....
A classic example of microsoft's lack of innovation and commercial development of new product lines would be the canning of the team behind Flight Simulator.
At the time they were wound down, FS11 was mid development, the latest version of Train Simulator was about to ship, and they had just started to branch out into the government and military simulation sector and serious gaming. Most importantly, they were by all accounts actually making a good amount of money.
But it seemed that as a team, their products were not exciting and hip enough, compared to say, Zune :(
Their current attempts at innovation are extremely mixed. Thankfully Azure appears to have improved it's website since I last looked, although various things I want easy access to are still hard to find. Midori is actually quite exciting, but it's a very long way away from being a production operating system.