1. Take ex-Nokia handsets, XBOX, and all the miscellaneous hardware and consumer software and cloud services and call that Microsoft Devices and Services.
2. Take Windows 8 for PCs and servers, Office, everything enterprise and call it Azure, Inc.
Spin the two entities out to shareholders and reap the gains from letting investors own the thing they want to own, and from managers managing the thing they want to manage in the direction they want to go.
Azure would end up licensing a good deal of stuff to MD&S, but both entities could end up with a strong licensing business to third parties, too.
That would be nice, but I agree with fauigerzigerk: "...things will become much much worse for Microsoft before they get better"