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They never thought "the internet" would amount to anything, I can remember Gates making a presentation around 1994 1/2 and then released licensed copies of Spyglass Mosaic as MS-IE v.1 in '95... then hacked together IIS from unix TCP/IP C libraries glued together with a WIN-DOS 95 interface .
Lets not forget "innovating" MS-Excel to kill Lotus 1,2,3... MS-Word to kill Wordperfect, etc, etc.. now Silverlight to (try to compete/kill) Flash
You can't innovate from the back of the pack.
(Quoting a cartoon I keep above my desk) "Remember, if you're not the lead dog, the view is always the same."
Microsoft will never lead in search.
email (or e-mail)
Goes far to explain how dumb MS-vision is .. when it comes to embracing internet as a business model to survive or thrive upon.
I haven't tried my hand at MS-Office Vista, but even the Office-2007 fresh installation points out the following words as some spelling mistakes:
email (or e-mail)
The word Internet is considered a proper noun and is supposed to be capitalized. You might see the spell check kick in to ask you to fix that.
I'm guessing you saw something similar with Email or E-mail starting a sentence. The Office spell check might be asking you to capitalize the first letter. Other than that I haven't seen these marked as spelling mistakes on any of my systems.
Apple has a long list of significant _hardware_ innovations, from the original Apple ][ floppy disk controller, to the iPod interfaces. Granted, their software is not "innovative" in the fuzzy-wuzzy lukutus substance-challenged style of your typical Madison Avenue glitzy PR agency. But it is "innovative" in that they like to make it work. Just work.
That's a far harder achievement, a far greater achievement, and one that Microsoft is not likely EVER to copy.
Which is why Apple deserves the credit it gets, and more; and Microsoft deserves all the abuse it gets, and far more.
IBM, for all its faults, is another company that has a solid track record of solid engineering, both hardware and software: which sometimes counts more than "surface innovation" (although I'm extremely glad my college didn't have IBM equipment!) Not to denigrate the innovation that did escape from IBM: Fortran shouldn't be counted, as it was just one of several equivalent languages; but APL and SQL should be: also Winchester hard disk technology and some interesting ideas about IC manufacture.