What's going on at Microsoft? The usual…
The problem with a company the size of Microsoft is that you can't reliably gauge how well it is doing why looking at any one part of it. The operating system division seems at least somewhat committed to return to sanity. Search is busy not gaining any market share. Hotmail is still useless. Enterprise software is finding new ways to package old software, same as ever was. And gaming is actually doing pretty well.
Console gaming anyways. Microsoft took it among themselves to, what I can only very generously describe as, try and unify gaming-related services through a Xbox Live related abomination called Games for Windows Live. They started this out by shoving their "solution" down the throat of every developer who wanted to publish an Xbox 360 game for the PC.
Now, the idea makes sense. Having one account for both Xbox and PC gaming. The implmentation is where it starts hurting.
Tycho over at Penny-Arcade noticed that when logging into Games for Windows Live, the same account on Xbox Live would get knocked offline. He then taled about this issue to a Microsoft person:
I spoke to someone from Microsoft about this very thing, and they said it was interesting, but asked how it would work mechanically. Where would messages be sent? Would one take precedent over the other?
If this is the kind of issue that causes them problems then their problems are, quite frankly, richly deserved. Just have one central place where messages go and other customized views for different access points. It's not a hard thing to do, we've been using that approach for email for 25 years.
Compounding the problem is that instead of working to solve it before rolling out GfWL, they just made it impossible to log in outside of a game. Supposedly, they thought you might not notice getting kicked off Xbox Live if you start a game on your computer or laptop. Considering that they are marketing both platforms as things that go far beyond gaming, this is just cringe-inducingly stupid.
Update: This is relevant.