It's the management structure focused on short-term gains and promotion cycles, combined with a corporate culture focused very much on the same as management with the added twist of politicking, backstabbing, and undercutting other teams.

I've spent much of my life inside Microsoft's ecosystems. Not merely my career, but my technological life itself started with Win 3.11 on a parental laptop. I've spent so long in their orbit that I can generally infer what their latest thing does and how it works from an IT POV based on its product name alone, because I understand how Microsoft thinks from a marketing and engineering perspective.

As you say, they have some truly brilliant folks in their ranks. Those few diamonds are buried under mountains of garbage and slop from above, though. I mean, this is the company who pioneered full-fat PC handhelds 20 years before the Steam Deck, the smart watch a full decade before Apple, the home media ecosystem years before streaming apps dominated, smartphones before the iPhone, I can go on and on. The problem isn't the engineers so much as corporate mismanagement, but they somehow survive like a cockroach based on install size alone.