If you were to replace Ballmer as CEO of Microsoft, what would you do to save the company? Remember, this is a for-profit corporation, and you have to answer to the stockholders. Simply replying "turn everyone on to Linux" is not in the best interest of Microsoft. What would you really do to save the company?
If it was my money to spend, I'd make the jump to FreeBSD as the core, just as Apple did. I'd take FreeBSD and put the Windows API on top of that core and in doing so, leverage FOSS development for my own platform. Then I would push the UI guys to take a good hard look at OS X, and both the Cinnamon and particularly the KDE desktop and figure out what we could do to really make Windows rock. I'd also look hard at what makes Android so popular, which I suspect is the configurability of it.
I would also look at what KDE has done with Plasma Active and emulate something like that, where I could use the Windows core architecture on much less hardware and make everything work smoothly and partner with hardware manufacturers to release this tablet and possibly phone software. This is something that needs to be done fast! Android and iOS are so far ahead, it's something that needs to be fixed immediately. I would cancel the Surface and it's upcoming derivatives and rely on partners to execute the platform from a reference platform that Microsoft would develop in cooperation with someone like Asus.
Then, I would change Office to squash its complexity and get it working on the new FreeBSD Windows platform. I really like what Apple has done with iWorks, and that's how I'd like to see Office modeled, only with Office's power. The outcome would have to be a game changing Office platform.
Then, I'd make it so PC gamers can play against Xbox gamers on Xbox Live. Gaming on the PC would have to make a comeback to help move the Windows platform along. Xbox Live could be a big money maker if done correctly. It's through Xbox Live that I'd setup an app store to sell software for Windows, the mobile architecture, and Xbox itself.
Lastly, I'd revamp Bing. It's simply not competitive.
So, what would you do if you replaced Ballmer?