Who is Microsoft? Do they have a sense of identity that clearly communicates who they are and what they want? They are a server OS company, they are a productivity software company, a development tools company, a game console company and now a consumer hardware company. What if they were aiming to be seen as the mid-range option, producing cheap software and hardware of quality good enough for most people? If the quality is high enough and the price is low enough, that will sell.
Apple aims for gleaming sculptures of consumer electronics, polished within an inch of their lives, and priced as if they don't expect you to replace it in 12 months. Microsoft should produce solid quality at reasonable prices. Not the no-fuss, no-frills, bargain basement stuff, just good hardware and software that people can afford. Differentiate from Apple by going for sensibility, not being just as shiny.
Mokalus of Borg
PS - The problem, of course, is that shiny also sells.
PPS - And sells very well.