Analyst Warned Microsoft About Vista, Low-Cost PCs

extend the availability of Windows XP Home

Daugherty is the in-house market analyst who in early 2006 warned Microsoft's Windows Vista marketing team that the new operating system's "harsher" hardware requirements didn't make a lot of sense in a market that was skewing rapidly towards ultra-low-cost mobile PCs.

Thursday's extension makes Windows XP Home available for Microsoft OEM partners to pre-install a full two years after XP Professional is discontinued. The move is seen as an effort by the Redmond, Wash.-based software giant to stave off Linux in ULCPCs, but also as an admission of sorts that Vista's pricey system requirements aren't well suited to the growing ULCPC market segment.

Daugherty's warnings and the extent to which they apparently fell on deaf ears are part of a large collection of internal Microsoft e-mails that were unsealed by a U.S. district court judge in the ongoing Vista Capable class-action suit in Seattle. The exchange between Daugherty, fellow analyst Tim McDonough and several Windows marketing executives takes place on pgs. 59-67 of the unsealed electronic discovery.

Daugherty, in a Feb. 28, 2006 e-mail to marketing executives Mike Sievert, Rich Thompson, Brad Goldberg and others, asks a serious of tough questions about Vista given "some amazing stats and predictions on home notebooks" (Sievert's replies are in bold):

And I'm especially taken by the fact that sub $1000 laptops are now 50% of the home laptop market, and in Dec 05, accounted for 26% of all retail computers sold The implications may be (I know I'm missing some of the pieces (e.g. impact purchasing via retail, etc.): a) Are home laptops flying out the door because they are cheap, and thus might not need/want Premium Vista? b) Aren't system requirements for Vista on laptops harsher than today, when XP Home works easily on these low cogs models? c) Are our assumptions/predictions on the take rate of Premium too high, because we've missed the impact of the shift to cheap laptops? d) Should we try to mimic our "premium take rate" success on the home desktop (MCE), and apply to the home laptop?

Later on Feb. 28, 2006, Daugherty sends another e-mail reiterating his concerns about Vista and suggesting Microsoft could miss the boat on ULCPCs if they don't build a less costly product:

Net: I think even with minimal "premium up-pricing" (I'm being a heretic and almost suggesting another or product to nail the home laptop ...) ... there is a few Hundred Million of $ revenue to chase ...

Goldberg, in replying to Daugherty, downplays the analyst's concerns:

Ultimately, Microsoft's solution to Vista's propensity to "kill the golden goose" of cheap laptops was to go back in time and extend the lifespan of XP.