CNet interviewed Bill Gates this week and got his comments on Google’s Chrome OS.
Gates gets all ontological and shit on the web browser and browser-ness:

It just shows the word browser has become a truly meaningless word …What’s a browser? What’s not a browser? If you’re playing a movie, is that a browser or not a browser? If you’re doing annotations, is that a browser? If you’re editing text, is that a browser or not a browser? In large part, it’s more an abuse of terminology than a real change.

Gates’s confusion on what a browser is and isn’t could explain a lot of things about where Microsoft is. It could explain why their own Internet Explorer Browser continues to lose ground to Firefox, Safari and Chrome.
Microsoft is still very much rooted in an 80’s engineer mindset with a thorough lack of focus on design and usability. As we watch the world of software continue to evolve – in the browser and on mobile devices we find Microsoft in continual ‘catch up’ mode.
The same holds true for multi-touch. I have yet to see any noteworthy Surface applications that aren’t internal prototypes (And please oh please, no more demos of people pinching and spreading virtual polaroids or using PC Paintbrush with their fingers).
All of this unnovation comes despite spending over $9 billion each year on R&D.