Microsoft produced Windows 8 as a way to get more app developers to work on MS-related apps for phones, tablets, desktop apps, and, probably, to get people into the habit of purchasing Windows apps. That probably worked. (Any other argument fails to be convincing. If the old-style desktop was so bad, why is it that Apple and Linux were in no hurry to overhaul theirs? If any company could be expected to make a major change in a desktop OS, it would be Apple, who made no such change.) Unfortunately for MS, enough people rejected Windows 8 to cause Ballmer to lose his job and to cause PC sales to slump badly. Some people are just waiting for Windows 9, hoping that it will be a winner (as in “Windows ME & Vista déjà vu”). However, plenty of people are deciding this is a good time to switch to Apple or Linux. (Imagine what MS must be expecting when Dell, HP, etc., call--perhaps something like, “If you guys don’t come up with a decent OS soon, we and you are all toast!”)
Reviews of Office 365 are, surprisingly, fairly positive. Xbox must be pretty successful. Enterprise and server operating systems and services are robust, so MS isn’t incompetent. Skype and Bing are at least functional.
What is MS to do? I really don’t know. Perhaps the desktop OS is now mature enough that there’s little profit to be made from incremental improvements, and MS must concentrate on its other product lines to maintain profits. (Wouldn’t it be cool to see MS hand over the Windows 7 desktop code to the open source community?)