Microsoft is actually a fantastic business -- even in a down PC market, the rest of the company's businesses (roughly 75% of revenue) continue to see rather robust growth. Indeed, over the last 12 months, Microsoft posted net income just north of $22 billion ($2.68 per share multiplied by the share count of 8.35 billion). While Microsoft taken as a whole is a superb business, its strategy with Surface/Windows RT simply makes no sense.
Why was Windows RT created?
It's important to understand the motivation for Windows RT (that is, Windows-on-ARM). Back in the early days of the smartphone/tablet boom, it was a widely held notion that only ARM-based processors could fit into the power envelopes (and come with the proper power management logic) necessary to build thin, fanless tablets. Intel's low-power system-on-chip efforts, at the time when Windows RT was conceived were lacking.