Well, they have done some innovation, but my memory includes them buying a C compiler company, buying an operating system, hiring Cutler to do an OS after he had already done two or three, doing C# which looks a lot like java in most all respects (and hiring the author of Turbo Pascal to do that). My recollection is also that they have been very behind on the web, and may still be.

So in my book they are a bit behind in the innovation department.

IE 5 was some time ago. A more recent view on the approach to standards is at http://www.tbray.org/ongoing/When/200x/2008/03/02/On-OOXML particularly in the paragraph titled "Con: Standards Process Abuse".