As a owner of a Zune HD, Microsoft can make some seriously solid products. Problem is there is a stink in the air that has made everyone believe [a lot of this comes from Vista I think] Microsoft sucks and can never make anything good.
Agree MS makes very nice products but fails because really, its all about timing. The orginal xbox was superior to the Playstation 2, but it came out at the wrong time. xbox 360 is a success because MS had a good product and launched at the beginning when the generation reset. Windows Phone 7 will probably be a great product too, but will fail because android and iOS are just too entrenched now.
The slate market is young. MS has a really good opportunity to leverage the windows platform advantages and be successful IMO, and this is coming from a person who doesnt even like MS. Imagine a thin fast slate that you can actually open create and edit office documents... that alone will make a windows powered slate the choice for businesses.