[Infowarrior] - Microsoft Altered Vista Requirements to Help Intel, E-Mail Says

[Richard Forno]

Microsoft Altered Vista Requirements to Help Intel, E-Mail Says

http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=MSFT:US&
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By Dina Bass and Ian King

Feb. 29 (Bloomberg) -- Microsoft Corp. caved in to pressure from partner
Intel Corp. to certify some chips as capable of running the Windows Vista
operating system to help Intel meet earnings estimates, a Microsoft
executive said.

The decision was made over the objection of some Microsoft officials, who
expressed concern that Intel's 915 chipset wasn't capable of properly
displaying Vista's graphics features, according to e-mails released Feb. 27
that were introduced as evidence in a case in Seattle.

``We lowered the requirements to help Intel make their quarterly earnings,
so they could continue to sell motherboards with 915 graphics embedded,''
John Kalkman, a Microsoft general manager who handles relations with
personal-computer makers, wrote in one message.

Microsoft's Mike Ybarra complained in another e-mail to Windows division
co-President Jim Allchin that Microsoft was ``caving to Intel'' and
``allowing Intel to drive our consumer experience.'' Microsoft made the
decision after Intel complaints that the chipmaker was ``losing orders,''
Microsoft Senior Vice President Will Poole said in another e-mail.

Microsoft was sued by consumers who claim the world's biggest software maker
labeled some PCs as ``Vista Capable'' that weren't able to properly run the
new operating system. Microsoft used the labels to encourage consumers to
buy PCs before Vista reached stores. The software, which had been delayed,
went on sale broadly in January 2007.

Intel's Denial

Intel, the biggest maker of computer processors, denied the contents of the
e-mail.

``With respect to the statement in the e-mail from one John Kalkman, we have
no idea who he is and we are absolutely certain he would have zero
visibility into Intel's financials, Intel's financial forecasts or anything
to do with any particular quarter at any time,'' said Chuck Mulloy, a
spokesman for Santa Clara, California-based Intel.

Microsoft, based in Redmond, Washington, confirmed the authenticity of the
e-mails and said in a statement that the comments ``reflect part of an
active discussion about how best to implement the Windows Vista Capable
program.''

Employees ``raised concerns and addressed issues with the intent to make
this program better for our business partners and valuable for customers,''
Microsoft said.

Vista Capable

At issue in the case, filed March 29, 2007, is whether Microsoft permitted
labeling PCs ``Vista Capable'' even if they could only run the Vista Basic
version, the low-end variety that doesn't include the new graphics system.

Some consumers bought PCs and tried to run more intensive versions of Vista,
expecting it to work based on the labels. District Court Judge Marsha
Pechman gave the case class-action status on Feb. 22.

Vista's Aero graphics system, which included 3-D and transparent effects, is
a key feature in most versions of Vista. It requires more advanced graphics
chips.

An e-mail to Microsoft Chief Executive Officer Steve Ballmer just weeks
after Vista reached stores indicated Intel was having difficulty because its
chipsets weren't working well with Vista.

``Intel has the biggest challenge,'' wrote Steven Sinofsky, a senior vice
president tasked with leading Windows development after Vista was largely
completed. ``Their 945 chipset, which is the baseline Vista set, `barely'
works right now and is very broadly used. The 915 chipset, which is not Aero
capable, is in a huge number of laptops.''

`Got Burned'

Windows Product Management Vice President Mike Nash, in another e-mail
released in the case, said he was confused by the labels too. He bought a
laptop with the 915 chips and found it wouldn't run Vista's new graphics
system.

``I personally got burned by the Intel 915 chipset issue on a laptop,'' Nash
said in an e-mail to other Windows and PC relations executives. ``I chose my
laptop because it had the Vista logo and was pretty disappointed. I now have
a $2,100 e- mail machine.''

Microsoft fell 33 cents to $27.93 yesterday in Nasdaq Stock Market trading.
Intel dropped 28 cents to $20.49.

In the fourth quarter of 2006, Intel reported a 39 percent drop in net
income, to $1.5 billion, on a 5 percent decline in sales. Net income rose 21
percent to $1.64 billion in the first quarter of 2007 as revenue declines
slowed.

Intel's chipsets are packages of semiconductors that work with its
processors to control functions in the computer, including graphics and
sound. Most corporate PCs rely on such chips for their graphics, rather then
dedicated chips made by companies such as Nvidia Corp., which are more
powerful.

To contact the reporter on this story: Dina Bass in Seattle at
dbass2 at bloomberg.net ; Ian King in San Francisco at ianking at bloomberg.net ;