If what Kempin says is true, then the real problem with MSFT is that Ballmer is not a visionary, and will not tolerate anyone else to be.
In hindsight, this hypothesis seems to clear up a lot of oddities with MSFT. Take Media Center, for example. It's given a pittance of a budget compared to XBOX, server technologies, and competing media products - so little budget, that innovation absolutely crawls along. It truly is "cut off at the knees" to use the article's words. Other examples of similarly-hamstrung product technologies can be found throughout Microsoft: Windows Phone, Windows Home Server, Streets and Trips, Messenger, I daresay Sharepoint, and countless little applications and tools that accompany their products such as Remote Desktop. Compare each of these products to what they each could be, and then consider the changes that MSFT has made instead to Windows 8 and Office 2010. And for what? Upgrades?
MSFT could be 3-4x the size they are today if they invested properly and timely in emerging markets, rather than cobbling those teams to save money for the next ribbon toolbar interface. It's actually quite astounding when you take a moment to think about it. Like Intel with ICs, they have enough size and resources that they could tackle any specific software target they wanted to if they execute properly. Just look at what they did with the XBOX for an example. Playstation 2 used to own the gaming console market, and Sony still hasn't recovered from the introductions of the XBOX and XBOX 360.