Another problem for Microsoft, according to Enderle: its poor image. Companies and individuals still do not trust the company, he said. And without its market influence, products like Zune "that probably should have never been funded, because they are counter-strategic to a tools company, actually reach the market," he said.

For his part, Cherry is concerned with Microsoft's inability to clearly articulate key messages—for example, its explanation of its agreement with Novell, which he finds "confusing," despite the positive findings of a survey Microsoft and Novell sponsored about customers' perceptions of the deal.

Read here about why technology decision makers are upbeat about the deal.

"There has also been a lack of clear explanation about what Office and Windows Live really are, and which pieces constitute really new and revolutionary approaches and new services versus a repackaging of MSN properties, such as Passport," he said.

The company has also not been clear enough about when products would be completed and what they would include.

Its marketing themes such as "People Ready" are "too generic—who wouldn't want to empower their employees? But how Vista and Office specifically do this better than, say, XP SP2 and Office 2003 is never documented. It is as if you have to have faith your employees will be more productive if you trust Microsoft and use all of its products," Cherry said.

But, on balance, both analysts say 2006 ended on a high note for Microsoft as it got Vista, Office 2007 and Exchange 2007 out of the door—at least to volume business customers; the consumer launch is Jan. 30, 2007.

The company also made progress on some ongoing efforts, such as security, which Cherry feels improved substantially in 2006, with better availability of information and an improved delivery of patches through the security response center.

To read about the "biggest launch Microsoft has ever done," click here.

However, the performance of some of Microsoft's strongest competitors, Apple and Google, "left them in the dust, and they did nothing material to address their long-term inability to do demand generation marketing," Enderle said.

There were also several shifts and organizational changes during the year, not all of which were good, he said.

The organizational changes made over the year seemed to address the operational problems the company was having, and aligning product groups around common interests made a great deal of sense.

Also, while Microsoft had put together "one of the best marketing teams on Vista that anyone can remember, they appear to have under-funded the effort, which could be a problem," Enderle said, adding that there were a lot of staff changes in people-facing positions, which are critical to maintaining relationships during difficult times.

"This group should be relatively stable and coordinated, and they don't seem to be either," he said.

Cherry also expressed some concern about Microsoft's strategy of moving people around, thinking that will create a change.

"There is no question that Steven Sinofsky is talented, but moving him across to Windows may not have the effect that everyone thinks it will," he said. "After all, Brian Valentine [who left the company for an executive position at Amazon.com] was brought in to get Windows back on track once before."

Click here to read more about Microsoft's restructuring of its Windows core operating system division.

Also, while it is "great to have unlimited faith in the power of software, there are some process and logistical issues that have to be fixed," Cherry said. "Merely calling a premature beta or release candidate a technology preview doesn't appear to speed up the development process or improve the quality."

Microsoft made some strange decisions over the year, according to Enderle, including using the Xbox model to create Zune. "It seems strange that Microsoft is changing to look more like Apple than the other way around. Microsoft is best when it is the standard across many vendors; it is weakest when it is the vendor itself," he said.

With regard to the company's focus on the software-as-a-service vision, which is being led by Ozzie, Enderle said Ozzie was brought in to fix collaboration and the company appears to be making slow progress in that regard.

"He [Ozzie] is kind of shy and not good in front of audiences, which may explain his invisibility. On the other hand he is an outsider, and they, historically, haven't done particularly well in Microsoft, although the same could be said of any large and complex company," he said.

According to Cherry, Microsoft spent a lot of time over the year getting late products out the door, and getting itself in position to deliver its Office and Windows Live services. But, while the Live pieces made public so far "could be interesting … they are confusing," he said.

Take Office Live. It has services small businesses may find interesting, but its very name has some people expecting to find Web-hosted versions of Word, Excel and PowerPoint, Cherry said.

Read here about why Windows Live is Microsoft's top priority.

"And the services really only work with the latest version of Microsoft's browser—it seems to me that a company who thinks they can offer Web-based services to only the latest version of Internet Explorer doesn't get the whole premise of Web-based services," he said. "If you are really serious about this, then you would support all browsers currently in use, or at least Firefox and Safari."

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This article was originally published on eWeek.com.