Microsoft's Vista Changes Could Backfire On Disgruntled Rivals

Microsoft's decision to bow to the European Union's demands that the company modify its new electronic document format and how Internet Explorer 7 is assigned a search engine may boomerang on the companies which voiced complaints, an analyst said.

Along with Friday's announcements of changes to Vista's security features, Microsoft also said that it would alter how its next-generation browser integrates with a default search provider, and promised that it would submit its XPS (XML Paper Specification) to a standards-setting organization. Both changes came at the request of the EU's Competition Commission, which is headed by Dutchwoman Neelie Kroes. The commission has voiced concerns throughout 2006 about possible antitrust violations in Windows Vista.

In IE 7, which will be released this month for Windows XP and included with Vista when it ships to enterprises in November and goes on sale at retail in January 2007, Microsoft will change how the browser is assigned a default search engine. Previously, Microsoft had said that IE 7 would simply grab the default search engine set in its predecessor, IE 6 when users upgraded to Vista or to the new browser within XP.

In May, Google raised questions about IE 7, and claimed that the update process of using IE 6's current search engine was giving unfair advantage to Microsoft. The two companies compete in several areas, including search, where Microsoft has just 12.8 percent of the market share compared with Google's 43.7 percent.

Although the U.S. Department of Justice has said that it didn't see how IE 7 gave Microsoft an advantage, the EU saw it differently. "The Commission advised us to make changes in the upgrade process for users moving from Windows XP and Internet Explorer 6 to Internet Explorer 7," said Brad Smith, Microsoft's general counsel, in a Q&A Friday. "We agreed to make these changes."

Now, however, IE 7 will explicitly ask users which search engine they want to set as the default. The first time the browser is launched, it will display a list of search engines that will include Google, Yahoo, Ask.com, and others.

"IE 7 will make it easier to change search engines," said Joe Wilcox, an analyst with JupiterResearch. "But the choice page could work against a default provider -- who you'd think would be Google for most users -- as work for the search engine."

By Wilcox's thinking, offering everyone a choice may actually cost big-name search services such as Google. "What about users who have IE 6 and Google because their computers came that way? Maybe they didn't know how to switch [search engines]. Now they suddenly have a choice, and they might pick something else besides Google." Microsoft also agreed to send its XPS electronic document format to a standards group to satisfy Kroes' agency. XPS is a file format intended to compete with Adobe's popular PDF. "[The commission] advised us that it wanted us to submit this new specification to a standards organization. We have agreed to do so," said Smith.

The XPS brouhaha came out of threats made by Adobe in June that it would sue Microsoft unless the latter dropped Save As PDF features from Office 2007 and gave OEMs the ability to strip XPS completely from Vista. Microsoft gave in to Adobe on both counts.

In its newest concession, Microsoft has not specified which standards body it will submit XPS to, nor a timeline.

That could mean trouble, said Wilcox. "The devil is in the details. But Microsoft will take XPS open-source, and that the format will be available not just on Windows, but on any platform or device." How that helps Adobe, Wilcox added, is hard to see. Taking XPS to multiple platforms -- a characteristic that Adobe's PDF boasts -- would make Microsoft's format a stronger, not a weaker, competitor.