Brad Silverberg, Co-founder Fuel Capital; Partner at Ignition Partners; Microsoft SVP (1990-99)
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The answer to this question needs to be read in conjunction with the answer to the “best decisions” one. Brad Silverberg's answer to What were Bill Gates's best decisions as CEO? One of the things I learned at Microsoft is that being smart is not the same as being right.  As smart as Bill and many of the people were, some bad decisions were made. 

Top of the list for me is that Bill did not engage – either himself or the company – in the political process early enough.  When Microsoft’s competitors were effectively lobbying the government, Bill’s attitude was the government should just go away and leave Microsoft alone.  In his view the company was competing hard but fairly; it was creating value for customers and that should be enough.  Well, this approach of not constructively engaging the government and concerned politicians, of not alleviating  concerns that were not going to go away, was a disaster.  The US federal government, many states, and the EU all essentially declared war on Microsoft, and Microsoft paid a devastating price. 

Intel did a better job figuring out how to negotiate with the government and avoided the catastrophic fate Microsoft suffered.  Google has done a better job with the US government but it seems the EU is on Google’s case now.

Bill also had a difficult time figuring out how to respond to the opportunity / threat of the Internet. It’s understandable.  When you own Windows in the late 90’s, life is good and why would you want things to change?  Bill’s view was to protect Windows, and didn’t come up with an approach that kept Windows and Microsoft’s systems strategy at the forefront.  The result is that Microsoft’s strategic position declined in the 2000’s.  It’s now coming to grips with the new reality and making necessary, if belated, changes.

Bill’s pursuit of Longhorn led to the debacle that was Vista, though Bill was Chief Software Architect, not CEO, at the time.
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