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'Vista Capable' A $1.5 Billion Windfall For Microsoft, Expert Says

Consumers suing Microsoft claim the program misled them into buying underpowered PCs.
Microsoft took in about $1.5 billion from its controversial "Vista Capable" marketing program, according to an economist's deposition that's part of a lawsuit that contends the program misled consumers into buying XP-based computers that could not be upgraded to a full version of the Windows Vista operating system.

"I have reached the opinion that Microsoft revenue from Windows XP licensing on Vista Capable but not Vista Premium Ready PCs sold to plaintiffs was $1.505 billion," University of Washington economist Keith Leffler said in a court document obtained this week by the Seattle Post-Intelligencer.

Leffler provided the estimate at the request of consumers who claim that Windows XP PCs labeled as Vista Capable were not able to run key Vista features, and that Microsoft knew it. Microsoft launched the Vista Capable program in 2006 with the hope of convincing consumers not to wait for the long-delayed Vista to buy new PCs. Vista wasn't released until January 2007.

In November, the court hearing the case ruled that Microsoft president and CEO Steve Ballmer must provide a deposition in the class-action lawsuit. Judge Marsha Pechman, of U.S. District Court in Seattle, ruled that Ballmer must testify because the plaintiffs in the case "have met their burden in demonstrating Mr. Ballmer may have relevant, unique personal knowledge of relevant facts."

In requesting Ballmer's testimony, the plaintiffs entered into evidence e-mails -- recently unsealed by the court -- in which Ballmer appears to have been informed of changes to the Vista Capable definition that allowed inclusion of an underpowered Intel graphics chipset.

"We have changed our branding program such that Intel's current integrated parts (915, or 'Alviso') qualify for 'Vista Capable' branding," wrote Will Poole, Microsoft's former director of Windows desktop development, in an e-mail to Ballmer dated Jan. 30, 2006.

Ballmer's reply indicates that he had discussed the issue with Intel CEO Paul Otellini. "I thought they had other issues, certainly Paul described other (nongraphics) issues. Is this really resolved?" Ballmer wrote.

Consumers Dianne Kelley and Kenneth Hansen sued Microsoft for fraud last year. They contend that the company intentionally duped customers by advertising as Vista Capable computers that lacked the horsepower to fully support all of Vista's features, such as its 3-D Aero interface.

Other e-mails entered as evidence in the case revealed that the Vista Capable campaign was the source of deep divisions among Microsoft executives.