Image: Microsoft CEO Steve Ballmer
Matt Sayles /AP
Microsoft CEO Steve Ballmer unveils Windows Server 2008, SQL Server 2008 and Visual Studio 2008. Microsoft Corp. will cut the price of some versions of Windows Vista. The move came a day after court filings revealed internal dissent over which Windows XP computers would be considered capable of running the new operating system.
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updated 2/29/2008 9:34:09 AM ET 2008-02-29T14:34:09

Microsoft Corp. will cut the price of some versions of Windows Vista, the software maker said late Thursday.

The move came a day after court filings revealed internal dissent over which Windows XP computers would be considered capable of running the new operating system — and a feeling on at least one executive's part that the company had "botched" the marketing of computers as "Vista Capable."

(Msnbc.com is a Microsoft-NBC Universal joint venture.)

Only copies of the year-old operating system that are sold in boxes directly to consumers are affected by the price cuts _ not the versions pre-loaded on personal computers. The cuts will range from 20 percent to 48 percent.

The reductions are to coincide with the late March release of Vista Service Pack 1, a collection of security fixes and other improvements.

Microsoft said the new prices will apply to the Home Premium and Ultimate versions of Vista, in both their full editions and the editions that upgrade an older or more basic operating system.

Both versions serve the tiny percentage of users who install an operating system on their own; most people get the latest version of Windows only when they buy a new PC.

Windows Vista's January 2007 launch was plagued by delays. To keep consumers buying PCs in the holiday season of 2006, Microsoft and PC makers promised free Vista upgrades later to shoppers who bought Windows XP computers.

At the launch, Microsoft was widely criticized for offering too many versions of the operating system _ including Home Basic, which didn't have the snazzy new signature look called "Aero" _ and for setting the price too high for the high-end versions.

Brad Brooks, a corporate vice president for Windows marketing at Microsoft, said in an interview that the company has since tested lower prices and found "product was moving much, much faster."

Brooks said he expects so many customers to buy Vista at the new prices that the price cuts will increase Microsoft's revenue, not subtract from it.

A federal judge recently said consumers could pursue a class action suit against Microsoft for labeling PCs as "Vista Capable," even though many were not powerful enough to run all of Vista's features, including the Aero interface.

Company e-mails produced in court chronicle Microsoft settling on a plan to market a wide range of XP-based PCs as "Vista Capable" after company officials realized in early 2006 that 30 percent or fewer of computers on the market could run the full-fledged version of Vista with Aero.

That realization apparently caused computer makers like Dell Inc. to worry that people would stop buying PCs for almost a year — until Vista launched.

The e-mails also showed Microsoft lowering the bar for "Vista Capable" to protect Intel Corp.'s sales of some widely used chips that weren't powerful enough for the full Vista experience.

Microsoft employee Anantha Kancherla was particularly blunt in his March 2006 response to a question about whether a certain PC configuration would be considered "Vista Capable."

"Based on objective criteria that exist today for "capable," even a piece of junk will qualify," he wrote. "For the sake of Vista customers, it will be a complete tragedy if we allowed it."

According to the e-mails, Jim Allchin, the executive in charge of Windows at the time, wasn't involved in the decision to brand a wide swath of XP computers as "Vista Capable."

Upon learning the details, Allchin wrote, "We really botched this."

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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