Having lived in this town for the better part of 20 years or so, I've developed my fair share of friends who will/are/did work at Microsoft.
None of these folks are able to make sense of these layoffs. Too few, not the right roles, why didn't the execs take pay cuts, etc., etc. The posts by MiniMicrosoft, one and two, and the resulting comments speak to this confusion with a high level of authority.
One thing Bob and I agree on is that Ballmer needs to go, if, for no other reason than the complete mess that Vista is, and the negative impact this has had on Microsoft. Let's call him the 4,999th entry in the one-dimmensional array MSFT has created (Programmers start counting at 0). The issue I have with this is that it's far too easy to be the critic. That is, who cares if Ballmer should go since that part is obvious - who do you replace him with?
Given the glacial pace that large companies consider movement, and let's say that Microsoft announcing non-layoffs in late January instead of Q4 of last year like all the good, nimble, quick startups did is indicative of this, you've got to believe that the board is thinking about a replacement.
The way this will play out is that within 18 - 24 months, Ballmer will step down, and a replacement will be named from outside Microsoft. Because Microsoft, while it is a software-ish technology company, is also a Fortune 500 company, 44th on the current list (a list which is going to go through some revisions this year and next methinks). Also, Microsoft Execs do not typcially go on to run other Fortune companies; they go on to run a startup, or they want to be an Angel, or part of a VC firm, or some-such. So, it seems to me that Microsoft is not such a great place to develop a career as a F500 leader. But, there are other F500 companies that DO create great F500 leaders. GE comes immediately to mind for most. And maybe, as a dark horse at the moment, Carol Bartz at Yahoo (currently 353rd on the F500 list).