Microsoft Windows: the Launch of Windows 7

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MICROSOFT WINDOWS: THE LAUNCH OF WINDOWS 7

Matthew Ball wrote this case under the supervision of Professor Miranda Goode solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality.

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INTRODUCTION

It was the spring of 2009, and Steve Ballmer, chief executive officer of Microsoft Corporation, was planning the launch of Windows 7, the company’s newest operating system. Successfully marketing Windows 7 had become essential for the company, which had faced numerous challenges in recent years. The company’s image had been tarnished by the commercial and public relations failure of its last operating system, Windows Vista. Moreover, the company became the target of a brutal series of advertisements by its largest competitor, Apple Inc., and was continuing to bleed market share. Beta releases had been well received by the Internet community, and Microsoft hoped that Windows 7 would not only improve its bottom line, but also restore its tarnished image. Ballmer was faced with a weighty question: How could carefully executed advertising, pricing and product decisions enable Microsoft to revive consumer perceptions, and realize Windows 7’s potential?

MICROSOFT CORPORATION

In 1986, Microsoft successfully released its first independently developed operating system, Windows 1.0 (see Exhibit 1). In 1989, Microsoft introduced its flagship productivity suite, Microsoft Office, which bundled individual applications, such as Microsoft Word and Microsoft Excel. On May 22, 1990, Microsoft launched Windows 3.0. The new version of Microsoft’s operating system boasted a more streamlined user graphics interface and improved application performance and integration, and sold over 100,000 copies in two weeks.1 Two years later, Microsoft ran its released Windows 3.1 along with its first promotional campaign on TV; the software sold over three million copies in its first two months on the market.2, 3

1“Windows Desktop Products History,” Microsoft. Available at http://www.microsoft.com/windows/WinHistoryDesktop.mspx, accessed June 15, 2009. 2 “Microsoft Visitor Center for Students,” Microsoft. Available at http://www.microsoft.com/about/companyinformation/visitorcenter/students.aspx, accessed June 15, 2009. 3 “Microsoft Company History,” The History of Computing Project. Available at Dohttp://www.thocp.net/companies/microsoft/microso Not Copyft_company_part2.htm, accessed or June 15, 2009. Post

This document is authorized for use only by Vandana Bharti at ITM Business School until March 2014. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860. Page 2 9B09A023

By 1993, Windows had become the most widely used operating system in the world.4 That same year, Fortune Magazine named Microsoft the “Most Innovative Company Operating in the U.S.”5 As part of its strategy to broaden its business, Microsoft released Microsoft Encarta in March 1993, the first encyclopedia designed to run on a computer.[5] Shortly after, the Microsoft Home brand was introduced, encompassing Microsoft’s new multimedia applications for Windows 3.x. Microsoft changed its slogan to “Where do you want to go today?” in 1994 as part of an attempt to appeal to nontechnical audiences in a US$100 million advertising campaign.6 On August 24, 1995, Microsoft released Microsoft Windows 95, which featured a completely new user interface, including a novel start button; more than a million copies of Microsoft Windows 95 were sold in the first four days after its release.6 In 2001, Microsoft released Windows XP, the first version of Windows that encompassed the features of both its business and home product lines. XP introduced a new graphical user interface, the first such change since Windows 95. Microsoft encountered turmoil in March 2004 when antitrust legal action was brought against it by the European Union for abusing its current dominance with the Windows operating system. This suit eventually resulted in a judgment to produce new versions of its Windows XP platform that did not include its Windows Media Player, as well as a fine of $613 million.7

The 21st century has seen Microsoft expand its offerings into several new product markets. In 2001, it entered the multibillion-dollar video game console market with the release of the Microsoft Xbox. In the following year, the company released Windows Mobile, a mobile phone version of its operating system.8 In 2006, the company released its own MP3 and digital music store, Zune and Zune Marketplace. Increased integration between these products provided Microsoft with a significant competitive advantage that helped secure the company’s market position across its entire product line.

WINDOWS VISTA

Development

Production on Windows Vista, originally known by its codename “Longhorn,” began in May of 2001, five months prior to the release of Windows XP. Longhorn was originally conceived as an update to the Windows XP operating system and was targeted for release in late 2003. However, faced with ongoing delays, concerns about feature creep9 and mounting criticism on the security of XP, Microsoft announced in August of 2004 that Longhorn’s development had been completely restarted,10 with the primary goal of

4 “Microsoft History – 1993,” WebArchive.Org. Available at http://web.archive.org/web/19961017232408/library.microsoft.com/msinfo/mshist/1993.htm, accessed June 15, 2009. 5 Gill Dunsford, “Feature: Brand Microsoft,” Sales Promotion. Available at http://www.salespromo.co.uk/article/90, accessed June 15, 2009. 6 “Microsoft Company History,” The History of Computing Project. Available at http://www.thocp.net/companies/microsoft/microsoft_company_part2.htm, accessed June 15, 2009. 7 “Commission Decision,” The Commission of the European Communities. Available at http://ec.europa.eu/competition/antitrust/cases/decisions/37792/en.pdf, accessed June 15, 2009. 8 Daniel Eran Dilger, “Microsoft plans “Skymarket” apps store for Windows Mobile 7 in 2009,” RoughlyDrafted Magazine. Available at http://www.roughlydrafted.com/2008/09/01/microsoft-plans- per centE2 per cent80 per cent9Cskymarket per centE2 per cent80 per cent9D-apps-store-for-windows-mobile-7-in-2009/, accessed June 15, 2009. 9 “Feature creep” is a tendency for product or project requirements to increase during development beyond those originally foreseen, leading to features that weren't originally planned and increasing risk to product quality or scheduled deadlines. Feature creep may be driven by a client's growing "wish list" or by developers themselves as they see opportunity for improving the product. “feature creep”, SearchCIO.com. Available at http://searchcio.techtarget.com/sDefinition/0,,sid182_gci860179,00.html, accessed August 13, 2009 10 Ina Fried and Marget Kane, “Microsoft overhauls Longhorn plans”, CNET. Available at http://news.cnet.com/Microsoft- Dooverhauls-Longhorn-plans/2100-1016_3-5326 Not Copy850.html, accessed June 15, 2009. or Post

improving the security and stability of the Windows platform.11 As a result, of Longhorn’s previously announced features such as WinFS, a revolutionary new data storage and management system, were eventually dropped.

In 2005, Microsoft initiated an unprecedented beta-test program that involved hundreds of thousands of volunteers. From September 2005 to October 2006, Microsoft regularly released Community Technology Previews to beta testers and two beta release versions to the public. After nearly six years, the longest wait for a Windows release, Vista was launched on January 30, 2007, at an estimated cost of more than US$6 billion.12

Features

Windows Vista included numerous new features designed to increase system security and provide users with a more aesthetic and user-friendly graphical interface (see Exhibit 2). Vista’s much-hyped Aero gave users the ability to choose the color of their windows and apply “glass-like” transparency effects. Additionally, users could “tab” through their Windows by stacking them in 3D or by displaying “live thumbnails” from the taskbar. Another new feature to Vista was Windows Gadgets, which allowed users to place a variety of continually running applications (such as a clock, weather tracker, slideshow or Sudoku) on a sidebar on the desktop. Additionally, Microsoft significantly improved its media suite, which included newer, high-definition-capable versions of Windows Movie Maker, Windows DVD Maker and Windows Photo Gallery.

User Account Control represented the forefront of Microsoft’s efforts to improve the security on the Windows operating system. UAC was designed to stop viruses and malware from making any unauthorized changes to the user’s system. When a user (with either administrator or limited privileges) tried to install or uninstall software, make system-wide configuration changes, download updates, allow a program access to their files, or connect their files to an Internet program, he or she would be prompted to confirm whether to proceed or not. When this prompt took place, the rest of the screen was dimmed and frozen, and only the authorization window was active. The intent of this process was to stop a malicious program from misleading the user by interfering with the authorization window or by providing its own authorization requests to trick the user.

Unlike many of its predecessors, the development of Windows Vista involved a complete restructuring of the Windows architecture, the purpose of which was to provide a base for advanced technologies related to how the system functions. While the results of this work were visible to software and hardware developers, they were not immediately visible to the user, who saw only what appeared to be revolutionary changes to how the user would interact with the interface compared to XP.

Release

Despite Microsoft’s overwhelming brand awareness and market share in the computer operating system market, Vista’s success depended on convincing its extensive but varied user-base to upgrade.

11 Aaron Ricadela, "Gates Says Security Is Job One For Vista", InformationWeek News. Available at http://informationweek.com/news/showArticle.jhtml?articleID=180201580, accessed June 15, 2009. 12 Marius Oiaga, “Vista – a $6 Billion Dollars Operating System,” Softpedia. Available at Dohttp://news.softpedia.com/news/Vista-a-6-Billion-Dollars-Operati Not Copyng-System-44096.shtml, or accessed JunePost 15, 2009.

Computing Requirements

Computing standards had improved dramatically since XP’s launch in 2001. However, Vista was also far more intensive and complex an operating system than its predecessor. As such, Microsoft’s official computing requirements — which essentially defined the initial market potential for the new system — became a key part of its launch communications. In the fall of 2006, Microsoft announced two different classes of Vista-eligible computers – Vista Capable and Vista Premium Ready (see Exhibit 3): “Through the Windows Vista Capable program, Windows XP-based PCs that are powerful enough to run Windows Vista are now available ... The Windows Vista Capable logo is designed to assure customers that the PCs they buy today will be ready for an upgrade to Windows Vista and can run the core experiences of Windows Vista.” On Vista Premium Ready, Microsoft announced it was also “working with PC manufacturers to introduce Windows Vista Premium Ready PCs. Windows Vista Capable PCs can earn the Premium Ready designation by meeting or exceeding the requirements outlined below. A Premium Ready designation ensures that the PC will deliver even better Windows Vista experiences ...”13

Editions

Microsoft also released and marketed Windows Vista for two different customer groups (consumer and business) via six distinct editions (see Exhibit 4). These editions allowed Microsoft to better price discriminate among customer groups. • Windows Vista Starter was designed for low-tech computers in the developing world only. • Windows Vista Home Basic was designed for budget users with fewer needs. It could not run many of Windows Aero’s effects and lacked many of Vista’s more complex media features such as Windows Media Center and Windows Premium Games. • Windows Home Premium was designed for the typical consumer’s everyday media and document editing needs. • Windows Vista Business was designed for small to medium-sized businesses and contained all of the features of Windows Vista Home Basic, as well as the ability to join a Windows Server domain, Remote Desktop Server, and Shadow Copy support. • Windows Vista Enterprise was designed as the volume licensing version of Windows Vista Business, but also added drive encryption, allowed for multiple different interface languages to be installed on the same system, and Microsoft Virtual PC. • Windows Vista Ultimate combined all the features of Windows Vista Home Premium, Windows Vista Enterprise and Windows Ultimate Extras and Complete PC Backup and Restore.

Pricing

Each of Windows Vista’s editions was sold at two different prices – one for new computer purchases, and another for users looking to upgrade their current computer’s Windows operating system. For new purchases, prices varied from US$199 for Windows Vista Home Basic, to US$399 for Windows Vista Ultimate. (Canadian prices ranged from Cdn$249 to Cdn$499.) Upgrade prices were US$99.95 to $259.14

13 Brier Dudley, “Microsoft changes its tune on Vista,” The Seattle Times. Available at http://seattletimes.nwsource.com/html/businesstechnology/2003652011_brier05.html, accessed June 15, 2009. 14 Ed Boot, “Vista fans, circle January 30 on your calendar,” ZDNET. Available at http://blogs.zdnet.com/Bott/?p=125, Doaccessed June 15,Not 2009, Copy or Post

Prices varied globally, with U.K. prices more than twice as expensive as their U.S. counterparts.15 Windows Vista was sold online and at brick-and-mortar stores in state-of-the-art plastic casing (see Exhibit 5).

Advertising

To launch Windows Vista, Microsoft ran a $500 million dollar advertising campaign entitled “The Wow Starts Now,” which was designed to recreate the buzz surrounding the launch of Windows 95.16 The “Wow” campaign promised to stun users with the ways Vista could make computer usage easier, safer, more entertaining and better connected.17 One of the campaign’s feature commercials juxtaposed an individual using Vista with numerous other “wow” moments, such as watching the first space-shuttle launch on television or encountering a deer at daybreak in the suburbs. Meanwhile, a narrator exclaims, “Every so often, you experience something so new, so delightfully unexpected, that there’s only one word for it – ‘wow’… introducing Windows Vista.”

Sales and Customer Responses

Vista’s launch was seen as a failure for Microsoft. Despite generating a considerable amount of press, reviews were tepid and customer interest was low. Market research firm NPD estimated that Vista sold only 100,000 copies in its first week, in comparison to over 400,000 for Windows 98, 250,000 for Windows ME, and 300,000 for XP.18 New versions of Windows had traditionally taken over a year to become adopted by the general public and business community. However, 13 per cent of users had upgraded to Windows XP a year after its release,19 but only five per cent had done so with Vista.20 A study done six months after Vista’s release by Patchlink, a patch management vendor, showed that only 13 per cent of those polled had either upgraded or planned to upgrade by the end of 2007. Seven months prior, 28 per cent had claimed to be planning to switch in 2007.21 PC World rated Vista the biggest technology disappointment of 2007,22 while InfoWorld placed Vista at No. 2 of its all-time technology flops.23 Even in 2009, two years after Vista’s release, XP continued to outsell it in both the consumer and business customer segments.

A number of tactics were used to encourage users to upgrade to Windows Vista. In early 2008, the company cut upgrade prices between US$40 to US$80 and set January 30, 2008 — a full year after Vista’s release — as the last day that Windows XP could be purchased. However, continued vocal demand for the seven-year old operating system resulted in Microsoft extending this deadline a full six months, to June 30, 2008. In response to manufacturer backlash, Microsoft discontinued the sale of physical retail copies of

15 “Microsoft starts Vista hard sell,” The BCC. Available at http://news.bbc.co.uk/2/hi/technology/6309651.stm, accessed June 15, 2009. 16 Ina Fried, “Microsoft readying Vista marketing blitz,” CNET. Available at http://news.cnet.com/Microsoft-readying-Vista- marketing-blitz/2100-1012_3-6047217.html, accessed June 15, 2009. 17 Microsoft Advertisement. Available at http://www.microsoft.com/library/media/1086/malaysia/windows/images/products/windowsvista/hero_winvista_loc.jpg, accessed June 15, 2009. 18 Benjamin Eldeman, “Windows Vista,” Harvard Business School, p. 9. 19 Ibid 20 Ibid 21 Ibid 22 Dan Tynan, “The 15 Biggest Tech Disappointments of 2007”, PCWorld. Available at http://www.pcworld.com/article/140583-5/the_15_biggest_tech_disappointments_of_2007.html, accessed June 15, 2009. 23 Neil McAllistar, “Tech’s all-time top 25 flops,” InfoWorld. Available at http://www.infoworld.com/t/platforms/techs-all-time- Dotop-25-flops-558, accessedNot June 15, 2009. Copy or Post

Windows XP , and continued to allow manufacturers to exercise so-called “downgrade rights” to install XP if they first purchased a Vista license..24 This agreement was set to expire on May 30, 2009, and would cost customers an additional US$50. By October, the fee had risen to $100, and then to $150 in December. Soon after, reports emerged of people buying used PCs in order to salvage copies of Windows XP due to the expense of downgrading. A study done by Register Hardware in the fall of 2008 showed that over 35 per cent of systems built to run Vista were being downgraded to run Windows XP. April 2009, demand for Windows XP remained strong, and Microsoft again extended this deadline to May 2010 – a full six months after the release of Windows 7.

At the end of March 2009 — eight years after XP’s release — Windows Vista had only 23.42 per cent share of the computer operating system market, compared to its predecessor’s 62.85 per cent.25 Microsoft claimed there were over 350 million Vista users – 50 million fewer than the company’s original launch expectations for the two-year anniversary.26

Criticisms

Computing Requirements

While Microsoft claimed that “nearly all PCs on the market today [2005] would run Windows Vista,” the higher requirements of the operating system resulted in severely worsened system performance for a large number of customers. Moreover, many claimed that their PCs could not even run Vista’s headlining features, such as Windows Aero. According to the U.K. newspaper, The Times, the full set of Vista’s features was “available to less than 5 per cent of Britain’s PC market.”

In early 2008, a Seattle judge approved a class-action lawsuit against Microsoft alleging the “software company is engaging in deceptive practices by branding new computers with a Windows Vista Capable logo even if they couldn’t”27 run all the new or most important features, or operate at a reasonable standard in order to generate higher sales level.28 Anyone who had purchased a Windows Capable PC in the United States was eligible to participate in the suit. The court case made public internal Microsoft communications that indicated senior executives recognized many of the issues associated with running Vista on lower end computers. For example, Mike Nash, corporate vice-president of Windows Project Management, was so hobbled by Vista features that he commented, “I now have a $2,100 e-mail machine.”29 Another, unnamed employee e-mail stated, “Even a piece of junk will qualify (as Windows Vista Capable).”30

Court documents eventually revealed that the Windows Vista Capable scheme had been launched in part to help Intel meets its quarterly earnings by selling older, stockpiled chipsets that were not capable of

24 Benjamin Eldeman, “Windows Vista”, Harvard Business School. p. 10. 25 “Operating System Market Share,” Net Applications. Available at http://marketshare.hitslink.com/operating-system-marketshare.aspx?qprid=10, accessed June 15, 2009. 26 Ina Fried, “Microsoft readying Vista marketing blitz,” CNET. Available at http://news.cnet.com/Microsoft-readying-Vista- marketing-blitz/2100-1012_3-6047217.html, accessed June 15, 2009. 27 Marcus Yam, “Microsoft Redefines ‘Vista Capable’ as Minimum Experience,” Daily Tech. Available at http://www.dailytech.com/microsoft+redefines+vista+capable+as+minimum+experience/article6843.htm, accessed June 15, 2009. 28 “They Criticized Vista. And They Should Know,” The New York Times. Available at http://www.nytimes.com/2008/03/09/business/09digi.html?_r=1, accessed June 15, 2009. 29 “They Criticized Vista. And They Should Know,” The New York Times. Available at http://www.nytimes.com/2008/03/09/business/09digi.html?_r=1, accessed June 15, 2009. 30 Preston Gralla, “Bought a Vista-Capable ‘junk’ PC? You may be in luck,” Computer World. Available at Dohttp://blogs.computerworld.com/bought_a_vista_capable_j Not Copyunk_pc_you_may_be_in_luck, or accessed JunePost 15, 2009.

properly running Vista.31 This decision was resented by a number of Microsoft insiders and executives, who disliked “giving up” 18 months of work to improve the user experience, and believed it would create industry confusion “on how important the visual aspects ... would play as a feature set new to Windows Vista upgrades.”32 Hewlett-Packard was particularly upset by the Windows Vista Capable issue. Richard Walker, senior vice-president at HP’s consumer PC unit, sent an e-mail to Microsoft’s senior executives in 2006, saying:

This just doesn’t make any sense to us, and for you to do this without talking to us is totally unacceptable .... It’s not very often you get pulled out of a meeting by a group of engineers who feel that they have had the rug pulled out from underneath them so that any competitive advantage we may have had in the marketplace is taken away, enabling any Tom, Dick or Harry with a PC containing a noncompliant processor/chip set to play at the same table. It begs the question when is a PC really Vista-capable …. I hope this incident isn’t a foretaste of the relationship I will have with Microsoft going forward, but I can tell you that it’s left a very bad taste with me and my team.33

This e-mail prompted Jim Allchin, then an executive at Microsoft, to write to Ballmer, saying, “What a mess! Now we have an upset partner, Microsoft destroyed credibility [sic], as well as my own credibility shot.”

A week after the lawsuit was announced, Microsoft changed the verbiage of the Windows Vista Capable program: “A new PC running Windows XP that carries the Windows Vista Capable PC logo can run Windows Vista. All editions of Windows Vista will deliver core experiences such as innovations in organizing and finding information, security, and reliability. All Windows Vista Capable PCs will run these core experiences at a minimum. Some features available in the premium editions of Windows Vista — like the new Windows Aero user experience — may require advanced or additional hardware.34

Performance

When it was first released, Vista was unable to efficiently perform basic file operations such as opening a Window. Copying and deletion were even slower than previous Microsoft operating systems. Large copies, like those required when switching computers, were extremely difficult or impossible without major workarounds involving the use of command lines. It was over six months before Microsoft was able to issue an update to resolve the issue. Furthermore, many argued that Vista executed typical applications such as Microsoft Word, WinRAR and Adobe Photoshop more slowly than did Windows XP with the same hardware configuration.35 In order to match the performance of Windows XP, retailers and third

31 Preston Gralla, “Was Intel behind the Vista ‘junk PC’ scheme?” Computer World. Available at http://blogs.computerworld.com/was_intel_behind_the_vista_junk_pc_scheme, accessed June 15, 2009. 32 Ibid 33 Iain Thomson, “HP furious over Vista Capable campaign,” vnunet.com. Available at http://www.vnunet.com/vnunet/news/2230682/hp-furious-vista-capable, accessed June 15, 2009. 34 Matt Buchanan, “’Vista Capable’ now means ‘Vista Handi-capable,’” Gizmodo. Available at http://gizmodo.com/gadgets/windows-vista/vista-capable-now-means-vista-handi+capable-251239.php, accessed June 15, 2009. 35 Patrick Schmid, “Windows XP vs. Vista: The Benchmark Rundown,” Tom’s Hardware. Available at Dohttp://www.tomshardware.com/reviews/xp- Not vs-vista,1531.html,Copy accessed June 15, 2009.or Post

parties recommended that users have at least 2GB of RAM – more than twice Microsoft’s stated Vista Premium Ready requirements.

Tests by CNET also concluded that Vista drained laptop batteries 10 per cent to13 per cent faster than Windows XP. To preserve battery life, Vista users had only two options.36 They could turn off Vista’s more advanced features, such as Windows Aero, or they could adjust their battery settings to a “Power Saver” plan, which would decrease system performance. Video game users complained that many games showed a drop in frame rate compared to Windows XP, unless running.37 By mid-2008, updates eventually placed Vista’s gaming performance on par with Windows XP.38 However, game developers’ recommended memory requirements on Vista were still higher than those on XP. A 2009 survey by Valve, maker of Steam, an online gaming content distribution program, showed that only 36 per cent of Steam users were running Vista.39

Compatibility

One of Vista’s most hard-hitting criticisms was its incompatibility with pre-Vista hardware and software. Due to the complete restructuring of Windows’ core architecture for the release of Vista, the majority of XP-based software and hardware drivers had to be rewritten to function. As a result, the majority of PC software and hardware was not compatible with Vista when it was released. This meant that consumers and businesses alike were unable to use the specialized software and hardware they needed on a day-to-day basis. As a result, many were forced to downgrade.

When drivers were released, the user typically needed to track down the driver for their specific model on the manufacturer’s website. Moreover, new drivers were never developed for many outdated peripherals or discontinued software. The sudden and unexpected obsolescence of existing hardware and software as a result of upgrading to Vista generated considerable backlash from unsuspecting customers. The Seattle Post-Intelligencer published a print article in its June 17, 2008, edition entitled “Man gets Windows Vista to Work with Printer” which covered a local senior’s failed attempts to upgrade his computer to Vista. Even newly updated software was notoriously unstable on Vista.40 For example, it was not until May 9, 2007, that Microsoft was able to fix an error that corrupted iPods whenever a user tried to eject through Windows Explorer or by using the “Safely Remove Hardware” feature.41 While many journalists admitted that this incompatibility was primarily the fault of hardware and software engineers who had not delivered their drivers on time, the result was that many businesses were simply unable or unwilling to upgrade to Vista.

36 Daniel A. Begun and Julie Rivera, “Windows Vista Performace: What to Expect,” cnet. Available at http://reviews.cnet.com/1990-3118_7-6695272-1.html, accessed June 15, 2009. 37 Rob Williams, “Windows Vista Gaming Performance Reports,” Tech Gage. Available at http://techgage.com/article/windows_vista_gaming_performance_reports, accessed June 15, 2009. 38 “Gaming Performance: Windows Vista SP1 vs. XP SP3,” Extreme Tech. Available at http://www.extremetech.com/article2/0,2845,2302500,00.asp, accessed June 15, 2009. 39 “Steam Hardware Survey: May 2009,” Steam. Available at http://store.steampowered.com/hwsurvey/, accessed June 15, 2009. 40 Nick Eaton, “Man gets Windows Vista to work with printer,” Seattle Post-Intelligencer. Available at http://blog.seattlepi.com/microsoft/archives/141343.asp, accessed June 15, 2009. 41 Travis Hudson, “iPod + Vista = BFF (Finally),” Gizmodo. Available at http://gizmodo.com/259054/ipod-+-vista--bff-finally, Doaccessed June 15,Not 2009. Copy or Post

User Account Control

While testing by Symantec Corporation showed that User Account Control (UAC) was highly effective in preventing malware infection, it was also widely criticized for generating too many prompts. Users were faced with constant work stoppages that many considered annoying, tiresome and hypersensitive. As a result, many users either turned off UAC completely, or they put it into auto-approval mode, rendering the feature useless.

Package

Ultimately, consumers claimed that they did not see any real benefit to upgrading. While Vista did include some improvements, many argued they were primarily aesthetic. As a result of Vista’s six-year development cycle, many were also aware of the fact that Vista’s most revolutionary new features, such as WinFS, had been postponed to future operating systems. This reaction was exacerbated by the fact that many consumers had computers that were incapable of running the features Microsoft had spent millions of dollars advertising, or simply bought an edition without them. In July of 2008, Intel, the world’s largest chipmaker and a long-time partner of Microsoft, announced that it had decided against upgrading the computers of its own 80,000 employees to Vista, saying, “The company made its decision after a lengthy analysis by its internal technology staff of the costs and potential benefits of moving to Vista … the staff just found no compelling case for adopting ….”42 Studies showed that close to 92 per cent of users thought Vista was too expensive43 – something Microsoft itself admitted44 – and described the new operating system as “slow,” “eye candy” and “paranoid.” A study conducted by ChangeWave in March 2008 showed that only eight per cent of corporate customers said they were “very satisfied” with Vista, compared to 40 per cent with XP. Interestingly, Microsoft’s own internal research said that 89 per cent of users were “very satisfied” or “somewhat satisfied with the product.”45

MARKETPLACE

Apple

Throughout the 21st century, the market share of Microsoft’s biggest competitor, Apple Inc., grew at the expense of Windows (see Exhibit 6).46 Apple’s operating system, Mac OS, ran exclusively on Macintosh Computers, which were also developed by Apple. Apple was also responsible for the hugely successful iPod and iPhone, which had been instrumental in exposing Windows users to Apple products. More recently, the Apple brand had become one the world’s most valuable47 and admired48 and was known for

42 Steve Lohr, “Et Tu, Intel? Chip Giant Won’t Embrace Microsoft’s Windows Vista,” The New York Times. Available at http://bits.blogs.nytimes.com/2008/06/25/et-tu-intel/?ref=technology, accessed June 15, 2009. 43 Stan Beer, “Windows Vista too expensive says users,” ITWire. Available at http://www.itwire.com/content/view/5450/53/, accessed June 15, 2009. 44 “They Criticized Vista. And They Should Know,” The New York Times. Available at http://www.nytimes.com/2008/03/09/business/09digi.html?_r=1, accessed June 15, 2009. 45 Dan Mitchell, “Blog Pokes Holes in ‘Taste Test’ by Microsoft,” The New York Times. Available at http://www.nytimes.com/2008/08/04/technology/04vista.html, accessed June 15, 2009. 46 Philip Elmer-DeWitt, “Would Gates have aired Laptop Hunters?” Fortune. Available at http://apple20.blogs.fortune.cnn.com/2009/05/17/would-bill-gates-have-aired-laptop-hunters/, accessed June 15, 2009. 47 “BrandZ 2009 Report,” BrandZ. Available at http://www.millwardbrown.com/Sites/Optimor/Media/Pdfs/en/BrandZ/BrandZ- 2009-Report.pdf, accessed June 15, 2009. 48 Philip Elmer-DeWitt, “Top 20 Most Admired Companies,” Fortune. Available at Dohttp://money.cnn.com/galleries/2008/fortune/0802/gallery.mos Not Copytadmired_top20.fortune/index.htm orl, accessedPost June 15, 2009.

being “cool,” extremely user friendly and high quality. While the company’s market share of the U.S. computer market was only five per cent at the end of 2006, it had more than doubled to 11 per cent by the end of 2008. Apple was also believed to hold more than 20 per cent of the consumer segment. A 2009 research report by Morgan Stanley revealed that close to 15 per cent of college students were Mac users, and 40 per cent said that their next computer purchase would be a Mac.

A large part of this growth was a result of Apple’s “Mac vs. PC” advertising campaign, which was launched in 2006 and which directly attacked Microsoft and the Windows Vista operating system. In the commercial, a young man dressed in casual clothes introduced himself as a Mac, and a middle-aged man in a dreary suit and tie introduced himself as a Windows PC. Afterwards, the two acted out a brief vignette in which the capabilities and attributes of the “Mac” and “PC” were compared, with the PC characterized as awkward, stuffy, defective or incompetent and the Mac shown as cool, reliable and capable. Later advertisements directly lampooned the shortcomings and failures of Windows Vista (see Exhibit 7). The ads quickly became extremely popular and well recognized by the average consumer, in addition to winning numerous industry awards for their effectiveness.

Google and the Rise of Netbooks

Every new release of Windows provided Microsoft with a considerable sales boost of Microsoft Office, its second largest source of revenue. Despite the near 100 per cent market share, Microsoft had difficulty convincing users to upgrade to newer versions of its US$300 to US$400 productivity suite. As a result, the vast majority of Microsoft Office’s sales occurred when users upgraded to or purchased a computer with Microsoft’s newest operating system. However, in 2006, Microsoft Office had the first real competition in over a decade, when Google launched a free, web-based productivity suite known as Google Docs. The program provided users with a word processor, spreadsheet, presentation and form applications, all of which could be created, edited and stored online. The suite was styled similarly to Microsoft Office, and maintained many of the menus, shortcuts and dialogue boxes of the Microsoft suite. While Google Docs did have a number of limitations when compared to Microsoft Office, its strength came from allowing users to collaborate in real time when using the application. As of 2009, Google had announced no intention to create an offline version of the free productivity suite; however, many analysts saw this as a considerable threat to Microsoft.

The rise of netbooks in 2008 proved to be one of the most serious challenges to Windows’ hegemony (see Exhibit 8). Netbooks were smaller and less powerful laptops that weighed between two to three pounds and typically cost under US$400. Netbook sales increased from only US$400,000 in 2007, to US$11.4 million in 200849 and were expected to hit US$35 million in 2009, and US$139 million in 2013.50 Due to their smaller size and low cost, most netbooks lacked the resources necessary to run Windows Vista. This inability “forced Microsoft to offer very low cost licenses for Windows XP to kill off the threat of Linux finding a foothold on low cost hardware.”51 As of January 2009, over 90 per cent of netbooks were

49 Dylan McGrath, “Analysis: Did Intel underestimate netbook success?” EETimes. Available at http://www.eetimes.com/news/latest/showArticle.jhtml?articleID=212701251, accessed June 15, 2009. 50 Christine Gallen, “35 Million Netbook Shipments Expected in 2009: An Era Begins,” ABIresearch. Available at http://www.abiresearch.com/press/1355-35+Million+Netbook+Shipments+Expected+in+2009:+An+Era+Begins, accessed June 15, 2009. 51 Prince McLean, “Microsoft allows HP to wipe Windows 7 with XP through 2010,” AppleInsider. Available at http://www.appleinsider.com/articles/09/04/04/microsoft_allows_hp_to_wipe_windows_7_with_xp_through_2010.html, Doaccessed June 15,Not 2009. Copy or Post

estimated to ship with Windows XP,52 which Microsoft was later estimated to have sold in the range of US$15 to US$35 per netbook53, 54 in comparison to the US$300 to US$400 Microsoft charges for Windows Vista. In mid-2009, Acer announced that it would ship netbooks that ran a version of Google’s smartphone operating system, Android. Product engineers at Dell had also performed several demonstrations of the operating system on Dell netbooks and regular PCs.

MICROSOFT FIGHTS BACK

By 2008, Microsoft began to take a far more proactive approach to tackling Vista’s poor public perceptions and shortcomings. Microsoft released weekly automatic updates to its operating system, and even published a complete software and hardware Vista “compatibility index” online. At Microsoft’s Worldwide Partner Conference in the summer of 2008, Brad Brooks, corporate vice-president of Windows Consumer Products, emphasized that “the Vista Microsoft first shipped is very different than the Vista that’s out in the market today.”55 Despite these improvements, the company struggled to overcome the extremely negative perceptions of Vista.

The Mojave Experiment

In the summer of 2008, Microsoft launched “the Mojave Experiment,” an initiative designed to overcome Vista’s public stigma. The campaign starred unknowing participants in an experiment, who were asked to rate their perception of Windows Vista based on word-of-mouth alone. Afterwards, participants were asked to rate Microsoft’s next operating system (OS), “Mojave,” and were shown a 10-minute demo. The average rating for Vista was 4.4 out of 10; the average rating for the new Mojave OS was an 8.5 out of 10. Microsoft widely publicized the results of this experiment across North America, including the reactions of participants when they were told Mojave was Vista.

The goal of the Mojave Experiment was to get consumers to “decide for themselves” rather than accept the commonly held negative perceptions of Windows Vista. However, the campaign was soon met with controversy and backlash. Critics contended the ads cherry-picked positive statements and failed to address the most important aspects of Vista. Moreover, during the experiment, Vista was run on top-of-the-line hardware, was demonstrated by a salesman, and didn’t allow participants — who were also highly inexperienced computer users — to actually try the operating system. In an article entitled “Microsoft thinks you’re stupid,” Maclean’s, a leading Canadian news magazine, stated that Microsoft was trying to shift “its bad P.R. problems over to their customers.” These sentiments were echoed by the New York Times, which called the experiment “a clever test that demonstrates nothing,” and stated “If a product has a bad reputation, it is not because of faulty perceptions … it is because of a faulty product.” Ben Carlson, the chief strategy officer for Bradley and Montgomery, the branding firm that conducted the experiment, stated, “It’s not about saying Vista is perfect, or that all these people fell in love with it; it was meant to

52 Preston Galla, “Think Linux Rules on Netbooks? Think Again,” PCWorld. Available at http://www.pcworld.com/businesscenter/article/160567/think_linux_rules_on_netbooks_think_again.html, accessed June 15, 2009. 53 “Microsoft Games on Windows 7 ‘Starter,’” Wall Street Journal. Available at http://online.wsj.com/article/SB124018108488732939.html, accessed June 15, 2009. 54 Reuters, “Microsoft shares hit 11-year low,” ZDNet. Available at http://news.zdnet.com/2100-9595_22-272793.html, accessed June 15, 2009. 55 May Jo Foley, “Microsoft on Vista: “The time of worry is over,” ZDNet. Available at Dohttp://blogs.zdnet.com/microsoft/?p=1475, Not accessedCopy June 15, 2009. or Post

show what people have heard about Vista is different from the reality… [the 10-minute demonstration] was a fair representation of the operating system.”

Crispin Porter + Bogusky

Soon after the Mojave Experiment, Microsoft hired the ad agency of Crispin Porter + Bogusky (CP+B) to develop a US$300 million dollar campaign designed to revive the Windows brand name. Soon after, Microsoft added US$200 million more to the campaign, despite rarely raising its advertising budget during non-launch years.56 CP+B had recently become one of the United States’ hottest agencies, which was particularly well known for the strength of its non-traditional and viral marketing techniques.

The first phase of the campaign showed Microsoft founder Bill Gates and actor-comedian Jerry Seinfeld as typical Americans. One ad showed Gates shopping for new shoes at a discount retailer with the help of Seinfeld. Another ad showed the two living with a suburban family. At the end of the advertisements, Seinfeld posed a cryptic question to Gates, such as “Are they ever going to come out with something that will make our computer moist and chewy like cake, so that we can eat them while we’re working? If it’s a yes, give me a signal – adjust your shorts,” after which Gates shook his buttocks.

Consumer reactions to the advertisements were either tepid or confused. The LA Times wrote “People are asking, nay, demanding to know what the minute-and-a-half long spot is trying to convey.” Gizmodo, one of the Internet’s most popular technology news websites, wrote “The New Seinfeld-Gates ads make no sense.” Seemingly anticipating the lack of enthusiasm, Microsoft offered an explanation for the commercial on its own site:

After seeing the new ad from Microsoft, which debuted today, some may wonder what Jerry Seinfeld helping Bill Gates pick out a new pair of shoes has to do with software. The answer, in the classic Seinfeld sense of the word, is nothing. Nevertheless, the spot is the first and most visible sign of an ambitious effort by Microsoft's Windows business to reconnect with consumers around the globe.57

Brand Keys, a marketing research firm, said that after seeing the ad, both Apple and Microsoft users had a more negative perception of Microsoft in the areas of innovation, technology, trouble-free design, and warranty and pricing. “When you see an ad perform this poorly,” said Amy Shea, the executive vice- president at Brand Keys who conducted the research, “you’ve got a real problem.” The chief executive officer of ECG, another advertising firm, said

The campaign lacked any sort of indicator of product differentiation, product benefits or product attributes... it does not seem to clearly communicate a true brand benefit. These spots were not helpful to Microsoft at all and reinforced the notion that Bill Gates and Microsoft is not in touch with mainstream Americans… Bill Gate’s attempt to come off as an everyday American, simply comes off as odd. No one can mask the fact that he is Bill Gates and worth billions.

56 Mary Jo Foley, “Microsoft earmarks another $200 million for Windows advertising,” ZDNet. Available at http://blogs.zdnet.com/microsoft/?p=1453, accessed June 15, 2009. 57 “Microsoft Kicks off new Windows Campaign with Star Power,” Microsoft. Availabe at http://www.microsoft.com/presspass/windows/featureStories.aspx?story=660dee9e-9606-4e77-843e-ed81d83c0bfe, Doaccessed June 15,Not 2009. Copy or Post

“It pulls none of the emotional strings that might have helped Microsoft reconnect with its audience,” wrote The LA Times.

“It did what it needed to do,” said Rob Reilly, partner and co-executive creative director at CP+B in Boulder, Colo., and Miami. “People who got it, got it.” However, two weeks after the start of the campaign, CP+B announced that it had decided not to run the third ad, which it had already produced, and would instead move forward with the campaign’s second phase.58 Soon after, rumors emerged that Microsoft had cancelled shooting of a fourth spot mid-production, and that up to 12 spots had been planned. This report was seemingly validated by the fact that Microsoft had paid Seinfeld $10 million for the advertisements.59

Phase two of CP+B’s ad campaign consisted of three series that looked to use Apple’s attack ads as the basis for a counterstrike.60 In “I’m a PC,” a Microsoft engineer who resembles the PC character in the Apple campaign introduces himself as a PC and then proclaims that he has “been made into a stereotype.” The ad then introduces a number of individuals, from celebrities like Eva Longoria and Pharrell Williams, to scientists, fashion designers, African schoolteachers and even shark hunters, all of whom affirm, in fast- paced, upbeat vignettes, that they are “PCs.” Apple executives have been “using a lot of their money to de- position our brand and tell people what we stand for,” said David Webster, general manager for Microsoft’s brand marketing. Webster further stated that the campaign illustrated “a strong desire” among Microsoft managers “to take back that narrative” and “have a conversation about the real PC.”

The second series of advertisements unveiled as Phase 2 of CP+B’s marketing campaign was entitled “Laptop Hunters.” In the commercials, which were shot from a hand-held camera, a narrator introduced a prospective laptop customer looking for a specific set of features, such as a “big screen,” “fast processor” and “battery life,” all under a certain price. The narrator then tells them “you find it, you keep it.” The commercial then went on to highlight the hunt for the perfect laptop, in which the hunter discussed the capabilities of various different PCs. The search also included consideration for a Mac, though it was ultimately dismissed as being “too expensive” or “too cool.” The hunter eventually settled on the “perfect” laptop, which the narrator subsequently paid for, and congratulated the hunter for purchasing a PC. At the end of the commercial, the hunters stated why they “are PCs,” with reasons including being “super picky” or because they “got exactly what they wanted.” Additionally, Phase 2 included a new variety of the “I’m a PC” advertisements. In these ads, children around the age of five illustrated how easy it was to use computing peripherals and Microsoft software to take, send and print photos for their family and friends.

While the advertisements were criticised for their rudimentary comparisons and bias, they were very positively received by consumers. In its Q1, 2009 investor teleconference, Microsoft reported that the “I’m a PC” and “Laptop Hunters” advertisements made consumers want to purchase 10 per cent more.61 A BrandIndex survey of 5,000 people showed that among 18- to34-year-olds, Apple’s “value perception” has taken a nose-dive since the release of the “Laptop Hunters” ads. BrandIndex rates a brand on a scale of - 100 to 100 by simply asking customers whether they feel they received good value for their money. In late 2008, Apple enjoyed a value rating of 70, which has since plunged to 12.4. Microsoft, meanwhile,

58 Owen Thomas, “Mircrosoft ad agency confirms: New Seinfeld ad produced, not yet running,” Gawker. Available at http://gawker.com/5051860/microsoft-ad-agency-confirms-new-seinfeld-ad-produced-yet-not-running, accessed June 15, 2009. 59 Joe Wilcox, “Cancelled: The Bill and Jerry Show,” Microsoft Watch. Available at http://www.microsoft- watch.com/content/marketing/canceled_the_bill_and_jerry_show.html, accessed June 15, 2009. 60 Stuart Elliott, “Echoing the Campaign of a Rival, Microsoft Aims to Redfine ‘I’m a PC,’” The New York Times. Available at http://www.nytimes.com/2008/09/18/business/media/18adco.html, accessed June 15, 2009. 61 Matt Buchanan, “Microsoft Says ‘I’m a PC’ and Laptop Hunters Ads Make People Want Windows More,” Gizmodo. Available at http://gizmodo.com/5225149/microsoft-says-im-a-pc-and-laptop-hunters-ads-make-people-want-windows-more, Doaccessed June 15,Not 2009. Copy or Post

rebounded from an indifferent zero in February to a more recent rating of 46.2, indicating that the company’s latest attempt to portray Apple as overpriced was hitting home with customers.

WINDOWS 7

Development

Development of Windows 7 began shortly after the release of Windows Vista, with the goal of creating a more refined version of the operating system.62 In a 2007 interview with NewsWeek, Bill Gates suggested that Windows 7 would be “more user-centric,”63 and would focus on performance improvements.64 Moreover, Senior Vice-President Bill Veghte stated that Microsoft’s goal was to “ensure the migration process from Windows Vista to Windows 7 is straightforward.”65 At Windows 7’s unveiling, Mike Nash, corporate vice-president of Windows product management, said the operating system was designed to be compatible with applications and hardware that were already compatible with Windows Vista.66 In May 2009, Microsoft announced that Windows 7 represented “less waiting, fewer clicks and less complexity.”67 In January 2009, Microsoft released a beta version of Windows 7 to the first 2.5 million people to download it. A final retail release was scheduled for October 22, 2009.

Features

One of Windows 7’s most significant new features was its “XP Mode.” XP Mode used virtual PC technology to allow Windows 7 users to run programs that worked in Windows XP, but not on Vista. Additionally, Windows 7 introduced Libraries, a virtual folder system that aggregated like content from various locations and presented them in a single unified view. Microsoft also redesigned Windows Security Center, and renamed it Windows Action Center, as it now encompassed both computer security and maintenance. A New User Account Control interface was also created, which provided users with the ability to select four different levels of notification protect and the ability to select which applications could store or track data.

Microsoft also spent a considerable amount of time redesigning the Windows interface (see Exhibit 9). The taskbar was completely overhauled. For example, Quick Launch was replaced with “pinning,” through which users were able to integrate applications features to the taskbar, allowing them to access “jump lists” for easy access to common tasks. Each application had a unique jump list that corresponded to the features unique to the application, whether it was recent files opened or common tasks. Similarly, the preview pane, which was introduced in Vista, was expanded to not only preview the windows opened by the application in a small-sized thumbnail view, but also to interact with the preview pane. For example, if Windows

62 Larry Dignan, “Ballmer: It’s okay to wait until Windows 7; Yahoo still ‘makes sense’; Google Apps ‘primitive,” ZDNet. Available at http://blogs.zdnet.com/BTL/?p=10464, accessed June 15, 2009. 63 Steven Levy, “Bill Gates on Vista and Apple’s ‘Lying’ Ads,” Newsweek. Available at http://www.msnbc.msn.com/id/16934083/site/newsweek/page/4/print/1/displaymode/1098/, accessed June 15, 2009. 64 Bill Gates, “Japan – Windows Digital Lifestyle Consortium,” Microsoft. Available at http://www.microsoft.com/presspass/exec/billg/speeches/2008/05-07japanwdlc.mspx, accessed June 15, 2009. 65 Marius Oiaga, “Windows 7 Will Not Inherit the Incompatibility Issues of Vista,” Softpedia. Available at http://news.softpedia.com/news/Windows-7-Will-Not-Inherent-the-Incompatibility-Issues-of-Vista-88625.shtml, accessed June 15, 2009. 66 Mike Nash, “Windows 7 Unveiled Today at PDC,” The Windows Blog. Available at http://windowsteamblog.com/blogs/windows7/archive/2008/10/28/windows-7-unveiled-today-at-pdc-2008.aspx, accessed June 15, 2009. 67 T. Ramachandran, “Microsoft promises less complexity in Windows 7,” The Hindu. Available at Dohttp://www.hindu.com/2009/05/17/stories/2009 Not Copy051751071100.htm, accessed June 15,or 2009. Post

Media player was opened and the mouse was hovering on the application icon, the preview pane would allow the user to Play, Stop, and Play Next/Previous track without actually having to open Windows Media Player. By integrating more basic features into the taskbar, the number of clicks a user needed to perform tasks was decreased, therefore reducing work disruption and improving overall user experience.

Windows 7 also introduced gestures to the Microsoft operating system. When a user dragged a window to the edge of the screen, “Aero Snap” would snap it in place on the side of the screen, allowing users to more easily sort and file windows beside one another for an easier comparison of documents and files. When moving a Window to the top of the screen, Aero Snap would also automatically maximize the Window. When a user shook a Window, Aero Shake would minimize all other windows in order to de-clutter the screen.

According to numerous performance tests, the Windows 7 beta seems to have outperformed both Windows XP and Vista in several key areas, including boot time and shut-down time, as well as opening, closing, moving and copying files and loading documents.

Pre-Release Response

Pre-release response to Windows 7 was overwhelmingly positive.68 Gizmodo wrote:

Windows 7 is shaping up to be an awesome OS – it’s everything people wanted Vista to be and more … [it]is the solution to Microsoft’s Vista problems … Consumer perception of Vista as an abysmal failure and a crappy OS; the use of XP instead of Vista in increasingly popular netbooks; and the critical lack of Vista interest from the business community. Windows 7 neatly resolves all of them.69

After reviewing the first beta built in January 2009, CNET said:

Windows 7 could be one of Microsoft’s greatest operating systems.” The Telegraph, a U.K. newspaper, wrote that “Microsoft has learnt a lot from Vista… (they) realized … that Windows 7 needs to make everything easier – playing music, joining networks, sharing photos should all feel simpler than they do currently. The good news is that with this beta, they already do; if Microsoft can really deliver on that vision in the full release, then Windows 7 should be a formidable progamme indeed.70

Moreover, preliminary testing had shown that Windows 7 worked “miraculously” on netbooks, and often beat the significantly less complex Windows XP on performance tests. Engadget, an award winning consumer electronics website wrote “Particularly for the netbook set, Windows 7 can turn a machine that's nearly unusable under Windows Vista… into a quite potent workhorse.”71

68 Matt Buchanan, “Why Microsoft Should Give Windows 7 Away,” Gizmodo. Available at http://gizmodo.com/5141443/why- microsoft-should-give-windows-7-away, accessed June 15, 2009. 69 Ibid 70 Matt Warman, “Microsoft Windows 7 in depth review: CES 2009,” The Telegraph. Available at http://www.telegraph.co.uk/scienceandtechnology/technology/microsoft/4163510/Microsoft-Windows-7-in-depth-review- CES-2009.html, accessed June 15, 2009. 71 Paul Miller, “Windows 7 review”, Engadget. Available at http://www.engadget.com/2009/08/12/windows-7-review/, Doaccessed August 13,Not 2009. Copy or Post

CONCLUSION

Ballmer knew that Windows 7 had the potential to be a smash hit for Microsoft. The new system could go a long way to not only reviving the company’s tarnished image, but also to help solidify its presence in a number of other product markets. However, Ballmer also knew that this kind of success would depend on how Microsoft marketed Windows 7, and here he was faced with a myriad of decisions. Should Microsoft continue to offer Vista and XP alongside Windows 7? How should Microsoft price the operating system, and should the price vary for those who were upgrading their existing computer from Vista or XP? Should marketing focus on the features and qualities of Windows 7, or address its improvements over Vista and its superiority to a Mac OS in the advertising campaign during the new product launch? Should Microsoft highlight Windows 7’s new features or its usability? How many editions of Windows 7 should the company offer? Ultimately, Ballmer knew that Windows 7’s success depended on Microsoft’s ability to successfully manage consumer perceptions during the launch of Windows 7. Major advertising, pricing and product decisions had to be made in a way that would both enhance consumer perceptions of the Windows and Microsoft brands and overcome the lingering scepticism that had plagued Vista.

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9B09A023 Exhibit 1 TIMELINE OF MAJOR WINDOWS RELEASES TIMELINE OF MAJOR WINDOWS with permission from Microsoft Corporation. permission from Microsoft with

DoPage 17 Not Copy or Post product screen shot. Reprinted Source: Microsoft

Exhibit 2

WINDOWS VISTA FEATURES

Windows Aero

Source: Microsoft product screen shot. Reprinted with permission from Microsoft Corporation.

Windows Gadgets

Source: Microsoft product screen shot. Reprinted with permission from Microsoft Corporation. Do Not Copy or Post

Exhibit 2 (continued)

Windows Flip 3D

Source: Microsoft product screen shot. Reprinted with permission from Microsoft Corporation.

User Account Control

Source: Microsoft product screen shot. Reprinted with permission from Microsoft Corporation. Do Not Copy or Post

Exhibit 2 (continued)

Live Thumbnails

Source: Microsoft product screen shot. Reprinted with permission from Microsoft Corporation.

Exhibit 3

COMPARISON OF WINDOWS VISTA CAPABLE AND WINDOWS VISTA PREMIUM READY COMPUTING REQUIREMENTS

Vista Capable Vista Premium Ready Processor 800 MHz 1 GHz Memory 512 MB 1 GB Graphics card DirectX 9.0 capable DirectX 9.0 capable and WDDM 1.0 driver support Graphics Memory 32 MB 128 MB HDD Capacity 20 GB 40 GB HDD free Drive space 15 GB Other drives DVD-ROM Source: http://technet.microsoft.com/en-us/library/cc507845.aspx

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This document is authorized for use only by Vandana Bharti at ITM Business School until March 2014. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860.

9B09A023 ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ Volume Volume Licensing Licensing Retail & OEM

✔ ✔ ✔ ✔ ✔ ✔ * um Business um Business Enterprise Ultimate

✔ ✔ ✔ ✔ ✔ Exhibit 4

✔ ✔ Consumers Consumers Business Business and Consumers COMPARISON OF WINDOWS VISTA EDITION EDITION VISTA WINDOWS OF COMPARISON indows-vista/compare-editions/default.aspx

3 Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited Unlimited 3 Unlimited Starter Starter Basic Home Premi Home Emerging Emerging Markets OnlyMarkets Licensing Retail & OEM

DoPage 21 NotEdition Target Availability Running application limit Desktop Window Manager Copy Windows Aero Windows Movie Market Center Windows Media Premium games Windows Server Joining domains Host Desktop Remote Group Policy orBitLocker MUI Language Packs Extras Ultimate Windows Post PC Backup and Complete Restore Source: http://www.microsoft.com/windows/w

Exhibit 5

WINDOWS VISTA RETAIL PACKAGING

Source: Microsoft product screen shot. Reprinted with permission from Microsoft Corporation.

Exhibit 6

MAC OPERATING SYSTEM MARKET SHARE

Source: Market Share, by Net Applications Do Not Copy or Post

Exhibit 7

“MAC VS. PC” – “SECURITY”

Mac: Hello, I’m a Mac

Bodyguard: Mac has issued a salutation. Cancel or Allow?

PC: Allow… and I’m a PC

Bodyguard: You are returning Mac’s salutation. Cancel or Allow?

PC: Allow

Mac: Okay… What gives?

Bodyguard: Mac is asking question. Cancel or Allow?

PC: Allow. He’s part of Vista, my new operating system. PCs have a lot of security problems, so he asks me to authorize pretty much anything I do.

Bodyguard: You are pointing out Vista’s flaws. Cancel or Allow PC: Allow. I could turn him off, but then he wouldn’t give me any warnings at all and that would defeat the purpose…so

Bodyguard: You are coming to a sad realization. Cancel or Allow?

PC: Sigh. Allow.

Source: Apple advertisement, 2007. Available at http://www.apple.com/getamac/ads/, accessed June 15, 2009

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Exhibit 8

NETBOOKS AS A PERCENTAGE OF LAPTOPS SOLD IN 2008

Source: Price Grabber

Do Not Copy or Post

Exhibit 9

WINDOWS 7 FEATURES

Jump Lists

Source: Microsoft product screen shot. Reprinted with permission from Microsoft Corporation.

Pinning Task Bar

Source: Microsoft product screen shot. Reprinted with permission from Microsoft Corporation.

Live Thumbnails

Source: Microsoft product screen shot. Reprinted with permission from Microsoft Corporation. Do Not Copy or Post

This document is authorized for use only by Vandana Bharti at ITM Business School until March 2014. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860.