Computers running Windows Vista might have "Intel Inside", but Microsoft's newest operating system won't be Inside Intel.

Intel, the world's largest manufacturer of processors that run Microsoft Windows, will not be deploying the Windows Vista operating system internally for its 80,000 workers, according to a published report Thursday.

An anonymous source at Intel told the New York Times that the chipmaker will stick with the older Windows XP until Microsoft rolls out Windows 7 in 2010 because it has found "no compelling reason" to upgrade to Vista.

Intel's decision could prove embarrassing to Microsoft, given the companies' close relationship. An Intel spokesman would say only that the company is testing Vista "in certain departments."

Intel isn't alone in its decision to bypass Vista. Most large corporations have not upgraded their PCs to Vista, despite the fact that it's now been on the market for 18 months and that a service pack designed to fix a number of bugs was recently released by Microsoft.

Many businesses, as well as government agencies, have cited Vista's cost, resource requirements, and lack of compatibility with older applications as reasons not to upgrade to the OS.

In many ways, Microsoft has itself acknowledged that Vista is a dud.

In a letter to customers earlier this week, Microsoft senior VP Bill Veghte conceded that Vista suffers from a number of problems.

"The architectural changes that improved security and resilience in Windows Vista led to compatibility issues with existing hardware and applications," Veghte wrote.

Microsoft customers "let us know you don't want to face the kinds of compatibility challenges with the next version of Windows you might have experienced early with Windows Vista," he continued.

Veghte said Windows 7 will use the same core architecture as Vista so that customers that have purchased Vista-compatible applications and hardware won't have problems upgrading to Windows 7.

In an unusual move, Microsoft recently decided to extend support for Windows XP, which debuted in 2001, until 2014 -- another sign that Microsoft realizes that many of its customers won't be moving to Vista anytime soon, if ever.