Inertia I'd buy if it were 2001. Everything up there except Bob is post anti-trust suit. There are kids in 8th grade that weren't born back when M$ had the excuse of "Inertia." I guess yeah, you can get away with a lot when you've got so much market share to bleed... but at some point, don't you want to stop the bleeding?
I'm not talking about Microsoft's inertia, I'm talking about their users. Corporate IT departments that only know Windows/have applications they don't have the talent, budget or time to rewrite. All those naive users whose whole mental model of how computers work is based on how Windows does things. All the businesses that run on Excel abominations. That's a lot of inertia working in Microsoft's favor. They're not going to drive those people away by sucking unless they suck enough that those people can't get what they need to get done done no matter how much suckage they're willing to work around.
Right you are, no doubt. It would make sense, though, that branching out into other areas would involve hiring people who... ...oh. Yeah, you're right. I guess that's it: when your core is a swirling black hole of incompetence, the further you drag genius from the periphery the more you suck its lifeblood. By that reasoning, M$'s business unit isn't the pumping heart keeping it alive, it's the festering cancer polluting all profit.
I don't think they're incompetent, making good software just isn't one of their goals. They've had plenty of brilliant people working for them over the years. The NT kernel was beautiful, but the OS they built on top of it was crap. Crap was all they needed to shoulder into the workstation market, so crap was what they shipped. Bing is a halfway decent search engine because the competition is Google.
To be fair, Balmer's mantra was always "developers, developers, developers, developers". You can shit all you want on Windows (and rightfully so), but they have bent over backwards for compatibility for more than a decade. Though portions of its libraries are always moving (I am actually having fun right now with a break in their USB-handling code), at its core, Windows' ABI has stayed constant. So the same .exe file that you got for your crusty old XP computer should (in theory) still work on your brand-spanking new W8.1 machine. This isn't always the case when the developers don't use the DirectX API correctly, or start mixing image libraries to hack together a customization, but for the most part, they far outstrip their biggest competitor, OS X, where support for PPC was entirely dropped after a major release and the value of shiny apps outstripped the value of decade old apps. Now, this has come to bite them in the butt, as "supporting the developers" has also come to include having a functional app store and a sane package manager, and retina-enabled GUIs are a hell of a lot more enjoyable than...
I ain't said jack about Windows. I find 8.1 to be a horrific user experience and something best left alone, but Windows hath serious market penetration. But it says something that in 2002 I had a phone that could FTP, run Excel, play MP3s and videos and feature an animated desktop and in 2007, I gave it up with tears of joy in exchange for a device that lacked copy and paste.