But really? Is that why Microsoft has fallen by the wayside (realtively)? Because they don't have good enough engineers?
I disagree. I think they have a wealth of talented engineers.
What they need(ed) are people with vision, a deep understanding of the future of consumer electronics and computing, and a way to execute on that vision. They need to deliver short, medium and long-term products that feed their vision. They need to show people the future of the industry instead of lagging behind it.
Engineering is a crucial component in that, but it's only part of the story IMHO.