Oh, sure, I absolutely agree that Microsoft is out-executing their competitors; there's a reason why the company has been so successful for so long! But, in my opinion, Microsoft has always been at its best when it acquires a system from outside the company and adds that magic "Microsoft touch" to marketing it. From the very beginning, when Gates first purchased that CP/M clone and rebranded it "MS-DOS", to succeeding major products like Powerpoint, Visio, SQL Server, and Internet Explorer, a huge number of Microsoft's best products have been acquired from outside the company.

Microsoft also knows how to successfully poach talent: they managed to nab an entire team of VMS developers away from Digital Equipment Corporation to create Windows NT, the operating system that eventually replaced the Windows 9X line and still forms the core of the Windows personal computer OS today. (I seriously doubt that DEC could have ever successfully penetrated the personal computer market in anything like the way Microsoft did, even if they had been given the exact same product from those developers...)

Honestly, Microsoft has been at its most spectacular when applying its marketing know-how to creative products acquired externally, and suffered its worst defeats when attempting to build products entirely in-house. So yeah, I do believe that Microsoft has some sort of a problem with technological innovation; at the very least, the true talent in the company lies elsewhere.