Designing and building hardware is easy. That is, easy relative to SELLING hardware. Retail, hardware supply chain management, inventory management, support, etc… are huge endeavors that Microsoft has very little capability for. If you have not actually tried to build and sell a hardware product you cannot really understand just how challenging it is. The DNA of Microsoft is that of a software company. Zune proved this. The ZuneHD was (and is) a fantastic piece of integrated hardware & software. But Microsoft’s execution in selling it was bush league.
Great piece by Charlie Kindel on why Microsoft isn’t going to be the next Apple any time in the near future.