I thought that Michael might have been too critical, but then I actually watched Ballmer get interviewed by Scoble (transcript here). Gosh. You do have to listen to it to get the full Ballmer effect... first thing, they need to cut back on his caffeine intake. My suggestion? Keep the product managers and evangelists in front, and lock Ballmer in a closet somewhere.
As to the claims of innovation? Hmmm - .NET is a clone of the JVM, right down to the lousy support of anything that's not like C#. Longhorn and the file system? (that slipped!). MS hasn't ever been known for innovation - they've been known as a strong second mover. Get off the "innovation" thing and just deal with reality.