Even before I begin to write I feel like I'm piling on. Indeed, Microsoft (NASDAQ:MSFT) has had one of the worst fortnights in recent memory. A delay in Vista has precipitated a corporate reshuffling. Internet Explorer faces another major security flaw. And employees are calling for the head of Steve Ballmer.

For all the feel-good talk about how cheap Microsoft's stock is, the company underneath has never been more vulnerable. Mr. Softy is losing time, talent, and fans, but it needs all three in abundance to shore up its business.

Losing time
Let's begin at the top, with Vista. Microsoft's next-generation Windows operating system has been delayed till at least November for business users and till 2007 for everyone else. And it's hardly the first time that's happened. In fact, over the years, Microsoft has become famous for postponing release dates. Should Vista be any different?

Yes, because the stakes are higher now than they've ever been. Never in its history has Microsoft successfully prosecuted a war on this many fronts. There's operating systems, where Mac OS X has been gaining ground. There's business infrastructure software, where Oracle (NASDAQ:ORCL) and IBM (NYSE:IBM) remain formidable opponents. There's the Web and search, where Google (NASDAQ:GOOG) is the heavy and Yahoo! (NASDAQ:YHOO) and AOL remain highly competitive. There's the gaming space, where the Xbox is a loss leader and mired in a tough battle with Sony (NYSE:SNE). And finally, there is what's to come. Though Microsoft has Windows Live and its own portal in MSN, it lacks the brand appeal of Yahoo! or Google. A portal loaded with light applications that easily integrates with Web content would make for a compelling adjunct -- or even alternative -- to today's install-and-manage desktop applications. (Read: Office.)

Losing talent
It's hard to be fast when the top talent is heading elsewhere. Consider the case of Kai-Fu Lee, Mr. Softy's former head of research in China who inspired a court battle when he chose to leave for Google. Ultimately, the judge in the case allowed Lee to join the search king. That's when the implications of the hire became perfectly clear: Upon leaving the courtroom with the good news, Lee threw both arms in the air, smiled broadly, and delivered the quote that should have sent shudders down Bill Gates' spine: "I feel great. I can't wait to start work tomorrow morning." The verdict: Microsoft, once considered a mecca for software developers, is no longer a good place to work. (BusinessWeek has chronicled Microsoft's problems with retaining talent here.)

Losing fans
Finally, cheerleaders have become critics -- especially employees. Take the Mini-Microsoft blog, for example. Run by a current Microsoft staffer, it is a breeding ground for criticism of the firm. Certainly there's some good in this. (Passion helps, after all.) But there's also a limit to how much a disgruntled employee will take. Read the paragraph above if you don't believe me. Rinse. Repeat.

There's even growing criticism among the punditocracy, with longtime Microsoft defenders joining the fray. That includes Foolish colleague and Microsoft shareholder Seth Jayson. Last week he pummeled Mr. Softy in a virtual smackdown that, for my money, was right on point.

Dance, Monkey-Boy!
Here's the ugly truth: Microsoft was, at one time, united behind the idea of software development. That's all it did. Now it has its fingers in consumer electronics, gaming hardware, and digital entertainment. In other words, Mr. Softy is rapidly becoming a conglomerate along the lines of General Electric and 3M. But it isn't ready for the change, and cracks in the company's once-impenetrable armor have begun to appear as a result.

CEO Ballmer and his team are either going to have to navigate the challenges of being huge and roller out those products faster, or choose which business matters most and focus accordingly. Either way, much work remains before Microsoft will be able to generate the kind of returns value investors are hoping for.

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Think you're done with the Duel? You're not! Go back and read the other three arguments, and then vote for a winner .

Fool contributor Tim Beyers is one of the few who thinks Microsoft makes pretty decent software for the Mac. Tim owns shares of Oracle. You can find out what else is in his portfolio by checking Tim's Fool profile . The Motley Fool has an ironclad disclosure policy .