Make your (their) own hardware. There are plenty of options, both HP and Dell have a market cap lower than the cash Microsoft has on hand Of course HP is selling off their Hardware business so the price should be less than their $46 Billion market cap. Microsoft could easily snatch up those assets and then work to integrate hardware and software (NOTE: Kinect for PC that only works on premium Microsoft Hardware, hint hint) This would be a huge shift from the innovate and share with the world method that Microsoft currently uses. It might anger some of their partners, but they would also be building a simple and valuable brand. Its try that this might accelerate the moves some of their partners are preparing to other platforms, but Microsoft ought to know that no one can afford to jump ship right now. But if they carefully and methodically moved into that space with quality by the time partners jump ship, PCs would be sexy for a change and frankly just like Macs, many would be willing to pay a premium for them. Which of course leads me to my next point.
The entire marketing staff at Microsoft should be fired. Why? Who knows what a people ready business is? I mean what company on the face of the Earth (besides MSFT) runs ads for a product that doesn't exist? I have never seen a Microsoft ad that made me think, I just have to have that! (Don't get me started on those ridiculous Bing commercials) Thus, they should move in a completely new direction. What they need is a marketing genius that can get these new products (and old ones into the hearts and minds of everyone). Too bad this one is not available. What else does Microsoft need?
Integration. Microsoft loves integration, but only in one place, within the Microsoft universe. As a result, the XBOX does not have Blu-Ray, Mac doesn't have Office, and I wouldn't be surprised if Skype starts to disappear from all non Microsoft platforms. I think this would be a big mistake. Instead of trying to stifle the rest of the world, recognize that a healthy computing ecosystem is better long term than a healthy and shrinking) Microsoft ecosystem in the short term. Imagine for a moment, running Microsoft Office on your android tablet instead of QuickOffice. In the end no one wants to use a cheap imitation (no offense, I use QuickOffice on my iPad) when the real thing is available. Imagine Office on Linux that works naturally. Imagine being able to actually collaborate with people anywhere in the world regardless of what platform all are running. Imagine Microsoft making money (legally this time) nearly every time a device is sold. Maybe then their Market Capitalization would return to the stratosphere it once easily inhabited.
In part 3, how to beat Google..