So why did mighty Microsoft turn so wimpy?

Time was when Microsoft inspired dread in the tech industry. With a few exceptions, most rivals and partners did their best not to get on Bill Gates' bad side.

So why did Microsoft agree to a two-tiered Vista upgrade program that its managers knew was a mistake? The trove of e-mails released in connection with a pending class action lawsuit paint a Microsoft strangely unwilling to stand up to pushy Wintel partner Intel.

Check out these juicy passages highlighted by Todd Bishop at The Seattle Post-Intelligencer:

"We are caving to Intel," wrote Microsoft's Mike Ybarra in a February 2006 e-mail to Jim Allchin, Microsoft's Windows chief at the time. "We are allowing Intel to drive our consumer experience. (Computer makers) support our goals here and they've made graphics investments to drive the (user experience) with consumers. I don't understand why we would cave on this when the potential to drive the full (user experience) is right in front of us."

Or this one from John Kalkman to Scott Di Valerio, who ran Microsoft's relations with PC makers at the time:

"In the end, we lowered the requirement to help Intel make their quarterly earnings so they could continue to sell motherboards with the 915 graphics embedded. This in turn did two things: 1. Decreased focus of OEMs planning and shipping higher end graphics for Vista-ready programs and 2. Reduced the focus by IHV's to ready great WHQL (Windows Hardware Quality Labs) qualified graphics drivers. We can see this today with Intel's inability to ship a compelling full featured 945 graphics driver for Windows Vista."

The love-hate MS-Intel relationship goes back years. But back before getting gobsmacked by Google and the Web 2.0 crowd, Microsoft was famous for throwing its weight around--even with Intel. We got a peek at some of the back-and-forth between those two during the Justice Department's antitrust lawsuit in the late 1990s.

Gates pressured Andy Grove to dump the development of its NSP software. He also held a one-on-one where he told his Intel counterpart that Microsoft had a big problem with Intel funding the development and distribution of free platform-level software. Here's an excerpt from the court's finding of fact:

"In fact, Gates said, Intel could not count on Microsoft to support Intel's next generation of microprocessors as long as Intel was developing platform-level software that competed with Windows. Intel's senior executives knew full well that Intel would have difficultly selling PC microprocessors if Microsoft stopped cooperating in making them compatible with Windows and if Microsoft stated to OEMs that it did not support Intel's chips. Faced with Gates' threat, Intel agreed to stop developing platform-level interfaces that might draw support away from interfaces exposed by Windows."

That was then and this is now. In the post-antitrust case era, Microsoft has new and equally pressing worries. On one hand, it has Neelie Kroes and the European Union to please. On the other, it's desperate for all the allies it can muster. Would Microsoft have risked alienating Intel had Steve Ballmer picked up the phone to Paul Otellini and told him to back off? You can only wonder.

In the meantime, I suspect Intel is likely to get an earful from its OEM customers as more e-mail revelations surface detailing backroom pressure on Microsoft over its "Vista Capable" program.

[dmackdaddy]

What do you expect?! Every time they try to do something the Man is always trying to keep them down! Meanwhile Google gets to pownce around like they're God's gift to the Internet. Just look at at Market Cap and that says it all. MSFT doesn't have to do much these days to reign supreme. Google keeps coming up with cool stuff that FREE so they don't care much about Homeless People getting FREE VMail. LOL.

[eldernorm]

dmackdaddy says, "What do you expect?! Every time they try to do something the Man is always trying to keep them down! Meanwhile Google gets to pownce around like they're God's gift to the Internet".

WHAT???? Yeah, Microsoft is some small, weak company that everyone jumps on. What brand of MS koolaid are you drinking.??? Was it paid by Micrsoft?

Microsoft has been using its money and powers to stamp on little companies for years. But the sharks are starting to smell blood in the water. Maybe pay back is best served cold. :-)

[mikalg]

"Vista Capable" problems also stemming from Intel? No surprise. MS should have done what is best for their customers...and not Intel. Great if everyone benefits, but just Intel and their quarterly/chipset earnings? Growing threats of anti-competitive practice lawsuits may be driving this type of behavior. Had this story read that MS "forced" Intel to take a loss to support their (MS) Vista requirements would have created even more IRE toward MS than this. I suppose I would choose the lesser of two evils too.

[rcrusoe]

IMO, they have absolutely no experience in doing "what is best for their customers". Their corporate attitude since the beginning as always appeared to have been: Our way, or the highway.

But, for a number of reasons, the 800 pound gorilla appears to have lost a lot of weight, and is unlikely to ever gain it back.

[darthstupid]

Meh. Making MS look like a "victim" here is doing an injustice to the truth. MS is a bully in the industry and every OEM and vendor knows it. The one time they bow to pressure and all of a sudden MS is acting like a battered woman... I don't buy it.

[-anon-]

No, this is perfectly logical: MS is a bully, but bullies are in fact very insecure - they fall when people realize that.

[Hernys]

OEMs and vendors that wouldn't exist if it weren't for Microsoft (If Apple, Sun or IBM had dominated the market) or would be receiving much more pressure than they ever received from Microsoft (if other, average tech companies had).
THere are few, VERY FEW companies that don't take an advantage when they have one, that don't try to push others to do what benefits them. And those few companies normally don't last. It's how markets work.

[globba]

"Time was when Microsoft inspired dread in the tech industry" is an urban legend.

All you have to do is get a job there and see how that is the exact truth. Go get interviewed, see their hiring process, meet their people, get an offer, and go there to work. Then you will see how much of an "illusion" the "power" of Microsoft is.

I spent a year there and met countless, clueless folks in charge of their most strategic projects. Microsoft is crumbling. The cracks are already in the foundation. Every "tremor" sent by Google and others is moving them millimeters closer to collapse.

The urban legend may now still be alive, but it is dying. No doubt the article author is getting the gist of it.

[tundraboy]

The Microsoft Prime Directive is "Protect and Preserve the Windows/Office Monopoly." It is not "Make the Best Software in the World." I wonder how many ideas were nixed by management because it was seen to threaten the Windows/Office monopoly. On the other hand I bet by this time management doesn't do much nixing anymore because the workforce already self-censors itself.

If you're a bright, creative, and inquisitive software engineer why would you want to work there?

[oldmanangry]

I see, and Microsoft reps going into Packard Bell threatening to yank its Windows 95 license if it kept pushing alternative office suite software was just an illusion huh? The author's point is not that Microsoft knew what it was doing, the point of the article is that Microsoft used to push companies around like there was no tomorrow. There's a reason the DOJ climbed on its back and a conservative, free-market, Republican, Reagan appointed judge would rule that Microsoft should effectively be broken up. The fact that you worked with "clueless" folks doesn't mean the company didn't have the ability to get other companies to cower in fear of Microsoft. You, obviously, worked on some macro function in Office XP.

[Downix]

Intel's done a play right out of Microsoft's playbook. Microsoft in the 90's was IBM in the 80's, the company nobody messed with, but with several other smaller players underneath looking to topple the king. Intel played it's cards incredibly well, caving just enough to survive and build up it's own strengths. Now the shoe is on the other foot, Microsoft is the one fading fast, dependent on Intel for it's own survival, due in part to it's own threats against Intel, who never want to be beholden to anyone again, to ever be in that position again.

How does it feel now?

[colamix]

I agree with globba's assessment, reading these internal emails reveals an astounding level of incompetence. Ballmer and crew are driving Microsoft straight into the ground and we should thank them for it. The shameless global plague this convicted predatory monopoly has become needs to go extinct.

[tundraboy]

I sold all my MSFT holdings after a couple of days of thinking about Ballmer's proposal to acquire Yahoo. That was the last straw. I sincerely believe that Ballmer will bring this company down.

My God, CEO of one of the world's largest software company and his main qualification is 'founder's college buddy'.

[edgedesign]

What goes around comes around.

MS was a bully that stifled innovation in the 90's and early 00's. They strong-armed vendors and they unfairly slowed or blocked competition.

[tundraboy]

What the price cuts reveal, if it isn't already obvious, is that Microsoft does not know how to sell retail. First they confound the retail customer with four different versions, then they whack them with ridiculously high prices. On top of that you have this fiasco with 'Vista Ready' vs. 'Vista Capable' vs (what was it?) 'Premium Ready' or something. Then you have the muddle with Xbox 360. Then there's the Zune --Bill Gates' doomsday weapon on his private war against good design.

Because the bottomline is Microsoft is able to sell product only if it has monopoly power to back it up. But if they need to really sell a product directly to a retail consumer based on its own merits? Where the product has to be functional, well-designed, attractive and, not least, **comprehensible**? Then Microsoft has no clue at all.

[eldernorm]

The difference is Apple is designing to serve the customer. Microsoft is designing to make money for Microsoft. Screw the rest of the world. Ballmer has even said so from time to time.

[siranthony]

Why is it the computer industry has been exempt from Consumer Protection Laws that protect against selling defective product(s)? When will they be held to the standards every other corporate enity is held to?

When will consumers stand up for themselves with One Voice and get the attention of those that have the ability to hold their feet to the fire?

I would like to see a study done that reflects the actual cost of lost time and productivity to the consumer (personal & business) do to the purchase of defective computer products. I am sure whatever that number is, it will far outweigh the intitial cost of product.

I am sure it will dispell the term 'Return On Investment' which is an industry standard to mislead consumers into spending their hard earned dollar,s they will never recover.

If a company listed on any stock exhange were to use such tactics to influence an investor to buy their stock, that company would be de-listed in a heartbeat.

It is well past the time you stand up for yourself, othewise I feel sorry for you not them!

[tanis143]

Um.... you really understand what this lawsuit is about? Your comment's tend to say no to that question. The products "functioned" just fine, however the term "vista capable" was misleading in that the customer thought they purchased an item that can run all of vista, not some stripped down version.

Also, if you look at the demographics of computer users you'll see that out of all the home users, a good majority of them have no real clue as to how their computer works. Thats why spam, viruses, adware, spyware, and the ilk do so well, too many people are internet/pc ignorant.

[Penguinisto]

Intel is not to blame this go 'round... It was Microsoft who caved, saying that the 915 chipset was good enough for Vista, when clearly it is not.

That said, Software should always be written to hardware, not the other way around. Microsoft was once able to push themselves because they were the de facto standard. Thanks to OSX and Linux, this is no longer the case, and they are learning (the hard way) that they now have to do something they never had to do before - please their partners and customers.

Sucks to be MSFT right about now...

/P

[charlie cooper]

Yo Penguinisto,

Re: "Sucks to be MSFT right about now...:

Not sure I'd go that far in that it's not as if the company is teetering on the edge. But yeah, I do get your drift. For Redmond, the 1990s must seem like an eternity ago.

[Slavka012]

No, 915 is not bad for Vista. I'm sure it is all right chipset. But Vista requires obscene amount of graphics power just to do what, blurred window border, and fancy ALT-TAB? On today's PC I could program these functions with NO support from graphics card... Perhaps I'd have to cut few corners, but it would still look very decent.

[Waam]

Isn't PC dominance enough? if everything they do is to protect Windows, why are they doing such a crappy job with their other ventures. They are just starting to look like the company that's losing at EVERYTHING instead of being a bully. Look at recent alliance failures, Play for sure and HD-DVD. xBox was wiped out, and the 360 had a good headstart, but it's already fallen behind the Wii, and now the PS3. They won't even report zune sales, lol. Not to mention how far behind MSFT is to Google with search and ad rev. The reason why all these ventures are failing, NO INNOVATION. All MSFT is doing is copying the real innovators of their respective markets.

[eldernorm]

Major BINGO there.

[rob tomba]

Intel was going to offer free platform level software and Microsoft shut them down. This is just another example of Microsoft subverting the quality computer experience and forcing their software on us. Why not let the user choose which software is best so we can all have a better computer experience. Hasn't apple quicktime video been superior for years to windows media player hence it should be the default player on a windows machine. Microsoft should stick to their strengths in making a smooth running OS and supporting their MS office monopoly. I realize that Apple is a worse offender in regards to monopolizing their platforms but they are not the big guy here.

[tundraboy]

"Microsoft should stick to their strengths in making a smooth running OS..."

I think Vista has clearly shown that making a smooth running OS is not Microsoft's strength.

Microsoft's strength runs more in the "predatory coercive monopolist" category.

[y82whs]

MSFT with BillG fully engaged: MSFT bullies Intel. MSFT with BillG exiting to run foundation: Intel bullies MSFT. MSFT post-BillG will not be the same. I couldn't see Bill saying "righto" to being screwed on their operating system.

Bill would've gotten that this fundamentally harms MSFT ( he'd know what a dog the graphics chip is, and I could see him being sarcastic about these confusing labels of "vista premium ready) and just said: "No." This isn't even Microsoft bullying -- just looking out for its own interests, it's their product to certify after all, and reality that the Intel graphic chip didn't run it.

Expect more of the same. Less assertive, less technical, less experienced, more junior folks getting pushed around and shipping second tier products.

[ewelch]

It's simple. It's because Microsoft is now irrelevant. They don't drive innovation, they don't create standards, and they simply continue to self-destruct as the companies they abused for so many years watch with not a little bit of schadenfreude.

No wonder Ballmer is throwing chairs. Look how Apple, in six months, made Ballmer a liar by selling more iPhones than all Windows Mobile phones combined! This is why Microsoft doesn't count any more.

[Jim1900]

The only reason most people are able to get on the Internet at all and post comments here is because of Microsoft's strong-arm tactics in keeping their software dominant and keeping Intel in line. If people think that the cracks are forming and enjoy watching the sight, they need to step out of the way before it crumbles. Try running Linux on your next processor approved by the European Union.

[eldernorm]

Sorry that it sucks to be you, Jim. Try an Apple system. Runs MS software, runs UNIX, runs Linux. When you build it better, it works better.

When you run around throwing chairs, all you get is broken chairs. :-)

[flagg3]

This post, and more importantly the comments in response to this post prove more than anything a point which I have been trying to make for some time now.

Look at ALL of the comments that have been posted so far in response to this very negative article about Microsoft. These represent what the average persons opinion is of Microsoft.

Now, take a look at the comments of ANY posts that deounce Windows Vista specifically, not just Microsoft: Here is just one example from earlier today:

http://blogs.cnet.com/8301-13506_1-9882885-17.html?tag=bl

Notice the amazing amount of 'Pro'Microsoft' responses, and all posted so quickly after the article appeared? This is not uncommon, as you will find similar very pro Microsoft comments on almost any anti-Vista article or editorial done here or at other large news sites.

The sad fact is that Microsoft PAYS a large number of people to rapidly respond to any criticism of Windows Vista. It's a fairly common tactic that Microsoft has employed for years. Remember that when you read all those PRO Microsoft responses and wonder where they come from. Shockingly, all of the Microsoft fanboys seem to disappear on articles that don't hit the magic Windows and Vista keywords.

[ArtInvent]

Microsoft wrote a 3D user interface that is bloated and impossible run on mid-level graphics chips at the time. And then expected Intel to rush rush and get higher end graphics chips onto mid-level motherboards, which, for once, they stood their ground and refused MS's demands to do. MS could have delayed Vista or been more honest in the labels they allowed to be put on computers. But no.

Does a 3D interface have to be SO demanding? No, not if the impressive 3D effects now running on Linux are anything to go by.

Let MS rot.

[cheshirkat]

Because the way to deal with a bully is to "bloody his nose."

[netlord80]

This is all well and good, but it seems that many here haven't been arround very long. MS has been in worse spots than this before. I tried to get away from MS back in the late 90's after they released Win98. I quickly found that I could not do that if I wanted to work and earn any kind of living.

Regardless of how Vista is doing right now, MS still has a huge market share and it will be quite a long time before that changes. Keep this in mind, people will buy and use what they know, and that is MS. It will be decades before any OS has any real chance of pushing out MS. And the truth is that Vista does work, and quite well. It is way too hardware intensive and pretty bloated overall. There just isn't much of a market for it right now.

I too long for a day of strong interoperability and many choices in the OS and Productivity sectors, but that day is a long way off. Win ME was by far the worst product MS ever released and it didn't even make a dent. Not to mention the 98 fiasco where they sold 98 SE as a new OS rather than a bug fix which is all it really was.

[eldernorm]

See above comment by Flagg3. Buy a Mac, run what ever software you want to. Support Microsoft to make a living is like making buggy whips to make the horse go faster. Its fine, as long as there are lots of horse drawn carts.

Toot Toot, is that a black ford model A coming around the corner? LOL

[rmva]

I have a very different memory of what was happening last year at this time. I went from BB to CC to Compusa looking for hot new computers with Vista preloaded. Instead, what I found was a ton of aging AMD Athelon's with a fresh coat of Vista slapped on the outside.

At the time of the Vista launch, AMD was coming off a hot run and there were very few Intel machines on any retailers' shelves.