Microsoft: We Don't Profit From XP Downgrades

Downgrade rights allow customers who buy new PCs with Vista Business or Vista Ultimate to revert back to XP Professional. Last week, Los Angeles resident Emma Alvarado filed a complaint in Seattle federal court accusing Microsoft of forcing customers to buy Vista PCs so that it could charge them for XP downgrades.

But Microsoft insists that downgrade rights are part of the Vista EULA and are simply an option it offers customers. "This complaint is mistaken. Microsoft does not charge for downgrades," said Microsoft spokesperson David Bowermaster. "If a customer exercises those rights, Microsoft does not charge or receive any additional royalty."

Microsoft also stands accused of twice extending the OEM deadline for downgrades -- to its current date of July 31 -- in order to continue reaping "tremendous profits" from downgrades. Microsoft also denies these claims. "The allegations about obtaining monopoly power or using it to profit from downgrading to Windows XP make no sense," Bowermaster said.

The irony here is that Microsoft would love nothing better than for talk of downgrade rights to go away. The fact that it hasn't yet speaks to the market's deep-seated loathing of Vista, and negative perceptions that persist in spite of Microsoft's far-reaching and expensive efforts to rehabilitate Vista's image.

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With Windows 7's release due sometime later this year, Microsoft has begun drilling home the message that XP is ill-suited to handle the complex security, compliance and productivity needs of today's enterprises, particularly when it comes to mobile computing. The message has also been that migrating to Vista now fixes these potential weaknesses.

Microsoft hasn't made it easy for partners to perform XP downgrades. In June 2007, Microsoft gave its Gold Certified partners the ability to perform Vista downgrades online through an automated process. Prior to that, downgrades were a time-consuming slog that required phone calls to Microsoft and validation of PCs on a one-by-one basis. Currently, non-Gold Certified system builders must also follow this path for downgrades.

The point of the lawsuit, then, appears to be with the charges that OEMs levy for executing the XP downgrades. And according to system builders, the downgrade process is time-consuming enough to warrant a fee.

Customers can perform downgrades on their own, but the process isn't easy, and an original copy of the media with a COA (Certificate Of Authenticity) is required to get the downgrade to work, said Todd Swank, vice president of marketing at system builder Nor-Tech, Burnsville, Minn.

Nor-Tech doesn't charge for performing the downgrade on new PCs it sells, and provides the service as a value-add.

Paul DeGroot, an analyst with Directions On Microsoft, says it appears that OEMs are charging what they feel is appropriate for downgrades, which means it's difficult to see how Microsoft could be vulnerable in this case.

"There's a certain amount of extra current to fight when you depart from the mainstream, and that's basically what these people are paying for," he said.