Intel-Microsoft Vistagate, Part 3
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News Analysis. Did Intel and Microsoft executives collude to reduce the "state of art" for Windows Vista graphics chip sets? |
I said "Most likely" in February blog posts, after 158 pages of court documents were released as part of the Windows Vista Capable lawsuit. More sealed documents were released Nov. 14, and they further suggest that monopolies Intel and Microsoft colluded to reduce the graphics standard to accommodate Intel's 915 chip set.
First, some background: Court documents show that through the end of 2005, Microsoft planned a single logo certification program for Vista. Graphics chip sets would have to meet the WDDM (Windows Display Driver Model) requirement to qualify for the Windows Capable program. By January 2006, something changed. Microsoft removed the WDDM requirement and set trajectory for a second logo program. The first, the revised Windows Capable, assured that systems running non-WDDM chip sets (the majority being Intel's 915 at the time) could run Vista Home edition. The Windows Vista Ready program, announced in June 2006, assured PC compatibility with all the operating system's versions.
The question hanging over this decision is why the WDDM requirement changed. Microsoft reduced the graphics standard for an operating system that required hardware with better performance than the state of art. Why then should Microsoft lower the standard, creating hardship for its customers and OEM partners?
On Page 30 of the earlier unsealed documents, Microsoft employee John Kalkman wrote about the 915 chip set: "We lowered the requirement to help Intel make their quarterly earnings so they could continue to sell motherboards with the 915 graphics embedded." Later, after explaining some of the negative market results, he admitted: "It was a mistake on our part to change the original graphics requirements."
Sometimes monopolies collude, or else they collide. The more recently unsealed documents fill in gaps in the e-mail chain that make collusion the clearer conclusion. A Jan. 31, 2006, e-mail sent by Intel employee Nick Davidson to Renee James reads: "I am very concerned that we are losing volume every hour we don't restate our direction. Are we on track to get messages by midday today to still be able to roll out to the OEM's/retailers this afternoon?"
The e-mail requires broader context. Throughout much of 2005, Microsoft worked with OEM partners to establish clear graphics guidelines for Vista. OEMs knew about the WDDM requirement, which the 915 chip set didn't meet. If Intel continued selling these chip sets, without Vista support, some OEMs would push back (and not take orders). Public acknowledgment that Intel's main graphics chip set wouldn't support Vista posed potential risks for the company on Wall Street. At the time, everyone expected Vista would be ready for holiday PC sales. So, it would be crucial for OEMs to ship Vista-ready PCs throughout as much of 2006 as possible. If 915 wasn't ready, OEMs would have to use different graphics chip sets.
In that context, statements about "losing volume every hour" and helping Intel "make their quarterly earnings" make sense of what happened. Something else, according to a Sept. 25, 2008, sealed brief filed by Windows Capable plaintiff attorneys and since unsealed: Three OEMs requested and were refused WDDM exception: Dell and Sony in 2005, and Fujitsu—five days before the public announcement with Intel. Microsoft resisted partner requests, but bowed to Intel.
Intel Wins One for the 915
Nick Davidson's "losing volume every hour" e-mail was in response to another sent by Renee James the previous day. Renee wrote:
Tonight [Microsoft] called with unbelievable news. They are going to change the Vista Capable (this is the real name of the program) to include 915/Alviso chipsets. This is a major turn of events. The net result is that all Intel integrated chipsets will be supported in the program.
All 915 and 945 parts will be considered Vista Capable...MS will no longer require LDDM (WDDM) driver in the requirements...Starting at RTM (Aug. 31), 915 will be disallowed because it doesn't have LDDM...There will be an online test tool to run on your PC to see if it can run Aero Glass—and our 915 systems will fail.
Based on the available information, I come to an easy conclusion: One monopoly colluded with another for economic gain—and in this instance causing harm to Microsoft, its partners and customers. Matters were even worse than intended, because Microsoft delayed Vista:
- Vista-inferior chip sets stayed in market longer than they otherwise should have.
- More consumers bought PCs incapable of fully running Aero Glass.
- Notebooks were disproportionately affected, because the state of the art was even lower than for desktops.
According to a Feb. 27, 2007, Microsoft e-mail: Only 60 percent of graphics accelerators shipping on desktops or notebooks supported WDDM during fourth-quarter 2006; 30 percent were Intel 915 chip sets. Seventy-four percent of notebooks and 58 percent of desktops shipped with integrated graphics. Eighty-six percent of notebooks were eligible for a Vista logo, but only 46 percent could run the Aero user interface. Consumers got the logo but not necessarily the fully implied promise.
The newly unsealed documents still leave huge gaps, and so some uncertainty about events, in the e-mail chain. Motivations are somewhat unclear, although the Windows Vista Capable plaintiff attorneys assert theories in the Sept. 25 brief, saying the motive for Microsoft lowering the standard "is readily apparent, i.e.., that Microsoft's primary supplier, Intel, and its primary customers, would otherwise have been saddled with a huge inventory of unsold 915 chip sets and unsold PCs containing chip sets that could not run Vista."
I can see some of that, but there's more going on, methinks. Intel's chip set development was out of sync with Windows Vista. The problem was bigger than existing inventory; Intel didn't have a compliant chip set ready for market.
What Is Collusion, Anyway?
Renee ended the Jan. 30, 2007 e-mail by emphasizing the importance of "sending in our #1 sales person Paul to close the deal." Who could that be? The e-mail is first addressed to Intel CEO Intel Paul Otellini.
The identity of "Paul" raises questions about how high up the Microsoft executive ladder discussions over changing the WDDM requirement took place. The way I see it—and courts might not agree—the higher up the executive discussion, the greater the collusion. Both sides could blame minions for bad decisions, not so when chief executives are involved. A separate Microsoft filing concedes that Intel's CEO and Microsoft CEO Steve Ballmer talked on the phone, but not making the WDDM decision.
Following my two February posts, several people suggested that the Intel-Microsoft action wasn't collusion, based on legal definitions. Here's the definition from Wikipedia:
In the study of economics and market competition, collusion takes place within an industry when rival companies cooperate for their mutual benefit. Collusion most often takes place within the market structure of oligopoly, where the decision of a few firms to collude can significantly impact the market as a whole. Cartels are a special case of explicit collusion. Collusion which is not overt, on the other hand, is known as tacit collusion.
Intel and Microsoft are frenemies; they're rivals and partners—and both are monopolies. In antitrust law, collusion usually applies to price fixing. But other legal definitions include fraud. Did Intel and Microsoft defraud consumers by way of Windows Vista Capable stickers on PCs that weren't fully capable of running the operating system? The Windows Vista Capable lawsuit may or may not find civil liability around fraud and deception.
But plaintiff attorneys go further than civil violations in the unsealed brief: "The Consumer Protection Act prohibits unfair or deceptive conduct." Intel and Microsoft aren't any two companies but two symbiotic monopolies. That said, the publicly released documents tell an incomplete story. Some of the story shows deep division among Microsoft executives about changing the WDDM requirement.
The answer to the question of intention is still uncertain. It's hard for me to accept that Microsoft executives would knowingly, aggressively and foolishly deceive customers to their harm and to that of the company and its partners. Collusion to lower the standard of art benefited Intel much more than Microsoft. What's needed is something akin to the flashbacks used in the TV show "Lost" to fill in what's missing and uncover motivations that determine whether or not executives colluded to deceive or to befriend. Stupidity isn't a crime.
I'd love to write the movie script. Wouldn't you?
Related Posts:
- Intel-Microsoft Vistagate, Part 2, Microsoft Watch, Feb. 29, 2008
- Intel-Microsoft Vistagate, Part 1, Microsoft Watch, Feb. 29, 2008
- Intel-Microsoft 'Capable' Confusion, Microsoft Watch, Feb. 28, 2008
- Were Vista Capable Stickers Incapable?, Microsoft Watch, Aug. 8, 2007
- The Trouble with Windows Vista Capable, Microsoft Watch, April 4, 2007
- Recent Lawsuits Target Vista, VOIP, Microsoft Watch, April 3, 2007
- When Vista Shifts into Low Gear, Microsoft Watch, Dec. 7, 2006
Comments (17)
Joe, companies who work with each other make accommodations every business day. It's called partnering, not collusion. And in agreeing to this change, MS went to a two tier logo program and provided extensive info about what capable versus ready meant. Turns out even that wasn't sufficient for some, which is unfortunate. But it's not like they didn't make a large effort to be clear. Finally, on the monopoly front, neither MS nor Intel are monopolies by classical definition. Never have been, and still aren't. Even the Feds had to creatively disregard existing competitors in making their ridiculous case for MS being one. Dominant, yes. Monopoly, no.
Posted by Paul | November 14, 2008 7:55 PM
This does not seem to be collusion because Intel and Microsoft are not rivals. This would be fraud, but only by Microsoft. Intel didn't claim their boards to be Vista Capable. Clearly Microsoft acceded to Intel's request; the question is why. According to your post, "Only 60 percent of graphics accelerators shipping on desktops or notebooks supported WDDM during fourth quarter 2006; 30 percent were Intel 915 chipsets." This means that had Microsoft not lowered the standard, many people would have bought computers they knew could not run Vista, so they would not plan on upgrading until their next purchase a few years down the line. By misleading these customers about their computer's inadequacy - which would be discovered only after their Vista purchase - Microsoft assured its sales. As long as no one discovered the agreement between them, Intel and Microsoft had a win-win situation: Intel sold its boards and Microsoft sold its operating system.
Posted by Steve | November 14, 2008 8:42 PM
"It's hard for me to accept that Microsoft executives would knowingly, aggressively and foolishly deceive customers to their harm..."
Why is this hard to believe?
Microsoft has a long, storied and studied history of deceiving its customers from its inception. Deception is in its essence. Its products do not work as described. Its products are stupidly conceived, designed, engineered, manufactured and sold on the basis of "innovation".
Can you say: SPoT, PlaysForSure, Zune, Xbox (MSFT deceived its customers for years about the shoddy quality and spent $billions attempting to fix its junk; some lots had defect rates > 40%), WinMo, LiveSearch. Each and every one on the list above is, in major ways a defective product that has been fielded to defend the monopoly motherships.
Moreover, its is the essence of a monopolist to deceive; a monopolist earns its monopoly rents on the basis that it looks as if it is competing but actually is doing all it can to crush competition and increase its rents. The essence of a monopolist is deception.
One need only point to the $billions in fines that MSFT had to pay in the US and Europe for its monopoly deceit.
One need not be sympathetic to trial lawyers but one should recognize the essential deceit that is at the heart of MSFT. It sells third rate, shoddy junk intended to deceive the customer.
Let us pray that MSFT loses the Vista case and must pay addition $billions in fines.
When the financial pain is enough, perhaps the blinkered, cheating, thieves that run MSFT will modify their behavior. If not, perhaps shareholders will wise up and throw the liars, cheats and thieves that populate the upper echelons of MSFT out.
Posted by Jeremy w | November 14, 2008 9:15 PM
Now it's easy understand a lot of things, i.e. the obvious similarity between the name Intel Core i7 and windows seven. Partners in grime and advertising?
Posted by Marco | November 14, 2008 9:35 PM
Steve, you are partially right. In fact, one of the internal emails reveals a Microsoft exec frantically appealing for Intel on the grounds they would lose billions and of course you don't need grade school math to deduce what it means for MS.
However, the broader definition of collusion is 'A secret agreement between two or more parties for a fraudulent, illegal, or deceitful purpose' and if you're a consumer having purchased one of these junk PCs, that's exactly what went down. Car analogies aside, if the labeling on your toaster says it will toast bread and it barely heats it up, you're toast.
Posted by Jeff | November 14, 2008 9:44 PM
http://www.computerworld.com/action/article.do?command=viewArticleBasic&taxonomyName=Windows&articleId=9120299&taxonomyId=125&pageNumber=1
Quote;
Some Microsoft executives reacted intensely to the decision to drop WDDM from Vista Capable's must-have list. "This kind of shit drives me crazy, Chris," said Mike Ybarra, a director of product management, in a message to a co-worker. "We have pushed the UI in Vista so hard in the last 18 months, and we get our OEMs to go with higher end chip sets and graphics parts on existing PCs to really drive the experience for consumers, and at the last minute, we cave to Intel and give 915 and other chip sets a back door into the programs."
Jim Allchin, then the co-president of the company's platform products and services -- effectively the head of Windows -- was even blunter in his criticism. "I believe we are going to be misleading customers with the Capable program," Allchin said in an e-mail undated in the motion. "OEMs will say a machine is Capable, and customers will believe it will run all the core Vista features. The fact that aero won't be there EVER for many of these machines is misleading to customers."
He argued that customers, not the computer makers or Intel, should be the priority. "End-customers must be the top priority. We must avoid confusion. It is wrong for customers."
Allchin resigned from Microsoft the day after Vista shipped in January 2007.
Posted by Marco | November 14, 2008 10:10 PM
I think this affair and questions and answers arising will be Mister Ballmer's ultimate undoing.
When Intel was entering into their medical devices campaign in February 2005, they were likely told Microsoft had the underlying technology to pull off a distributed medical records and interoperational medical data system for portable devices.
Intel would have geared up for subset capability chips for portable graphic devices with the understanding all would be in place when Vista appeared to pull off the kind of XML interoperations Microsoft had been claiming to be able to do all along later in 2005.
But, something happened on the way to the market. Microsoft revealed to Intel there was no way they were going to be able to pull off the distributed system because... well, let's just say the technology was not "mature" yet.
Intel was stuck with a whole bunch of chips suitable for a small portable data collaboration device with subset capabilities but not suitable for larger full featured machines.
What to do? What to do? Easy answer? Change the specs.
One has to wonder what pressure Intel could bring to bear against Microsoft management to make them pull such a classic boner. Revealing Microsoft's failure to secure technology to pull off distributed computing would be fear of God enough for Redmond in the battle they faced against Google in 2005. Plenty reason to pull out all the stops to placate an angry partner.
Mister Ballmer is a master businessman but when such individuals "give you the business" you usually come away more damaged than satisfied.
One wonders when Microsoft shareholders will wise up.
Collusion? Collision... with destiny, more like it.
Posted by portuno_diamo | November 15, 2008 2:08 AM
Poortuna,
you're on to the next pump eh?
why not share with the fine folks at MS Watch what vcsy.ob got in settlement? cat's got your tongue, then allow Al:
(Joe W., Al won't be offended if you delete the post, he just feel's it fair to let your long suffering readers know the payoff after putting up with poortuna's postings for so long)
*$2.9 million in non recurring money for a fully paid up license, LESS Ray Niro's 30% fee.*
(these figures are derivable from vcsy.ob's 10-Q)
and that is Al's last word here on the subject.
Posted by Al | November 15, 2008 7:04 PM
I agree with the above comments that Joe is, as usual speculating with out a shred of actual knowledge to back him up. This is clearly not a case of "collusion."
In fact, if you read the emails careful, you'll note that this is actually the doing of a single executive -- Will Poole -- who, against the advice of every single one of the folks working on the project (both technical and marketing) and, against the desires and knowledge of his management (Jim Allchin and several others), worked out a plan to accomodate Intel.
The plan was clever -- exploit the fact that Intel's chips would *run* Vista (this is technically accurate: I have a Sony laptop with one of those Intel chips running Vista -- it's not happy, but it works) to create a "Vista Capable" tier and then create a "Vista Premium" tier for the onest that would support all of Vista's features.
It's a typical engineering solution to a problem: It's perfecty accurate, and solves the problem for everyone involved. Only one problem: it's too clever and it missed one important thing -- the only people that needed to be satifisfied were the customers, and this two-tier model is actively confusing.
Will, as a senior VP, made a bad call, but once he made a commitment to a partner, his bosses felt honor-bound to support it, even though they all felt it was bad idea (you can see that in the emails). I'm sure that if they knew it would come to a lawsuit, they probaby would have found a way to back out of it, but I suspect they figured it would cause some negative feedback, but that it would pass once the program was done.
Will Poole appears to be gone from Microsoft -- I'm sure that this incredibly bad judgement call has something to do with it. Jim Allchin is gone for different reasons -- he screwed up the engineering job of delivering Vista.
Posted by Bob | November 15, 2008 9:11 PM
The thing that strikes me is that when you consider what the Banks are doing with the 700 Billion that we gave them (Not a lot)!!!!!,
All of the above is just the same Republican behaviour, " Who cares about the working class, who cares about any stupid idiot that Buys our Product,
as long as our Company makes Profit!!!!!!!!!! ie:- Microsoft and Intel.
I have just one word to you
OBAMA OBAMA OBAMA OBAMA
Posted by Andrew Neave | November 16, 2008 12:21 AM
Selamat pagi.
Pendapat saya, intel dan microsof sebaiknya fokus pada kebijakan perusahaan menanggulangi penggangguran di amerika.
Sehingga krisis ekonomi cepat tertangani.
Salam hangat dari indonesia.
Posted by Karscirebon | November 16, 2008 12:46 AM
"Stupidity isn't a crime."
True Joe, but it doesn't reimburse me my loss or misplaced investment in hardware. Damage to consumers has been done. Regardless of being intentional or accidental. So regardless of the court ruling and possible fines the consumer must take action on its own.
The current rise in Apple market share is a clear indication that this is taking place. So regardless of it being a crime or not action is being taken against Microsoft's bottom line. And that is something that should be calling the attention of Microsoft executives.
Posted by g | November 16, 2008 10:45 AM
I think this was really a case of panic on the part of MS's sales and marketing staff. They didn't like the minimum hardware requirements given them by development and felt they could only sell Vista to too small a subset of the current PC market. Plus at this time the low cost notebook market was just taking off and without this change, Vista wouldn't be viable on anything but upper end notebooks. I think this is less collusion between Intel and MS, as stupidity and lack of communication between MS departments.
The fact that R&D was proved correct is one of the biggest nails in Vista's coffin, ie running Vista on all these sub-standard computers was a major major contributor to Vista's bad reputation.
I wouldn't be surprised to see NVidia/ATI enter a larger lawsuite if this proceeds, as their sales were probably quite negatively affected by this, ie too many people bought the cheaper Intel chipset rather than a more premium graphics card (which all have quite cheap low end models that work quite well).
Another party that might sue also is all the games manufacturers who used more features in DirectX 9 and 10, only to have that support removed from a requirement of Vista and hence had their market dramatically reduced also.
Posted by smist08 | November 16, 2008 2:10 PM
What's missing from all of these arguments, Part 1, 2 and 3, is Microsoft's representation of "Vista Capable". Where did MSFT represent that "Vista Capable" meant capable of running Aero? From my perspective of the Vista launch, MSFT made it VERY CLEAR that Aero was not part of the basic OS and would only be available on machines with exceptional graphics capability. It is an "available" feature of Vista. Note that the use of the word "available" is used widely in Automotive advertising to indicate features that are high end options and not part of the base product. If the machine ran Home Basic, it could run Vista. Using the same logic for this lawsuit, one could argue that any machine that was labelled "Vista Capable" should be able to run Vista 64. This is just another parasitic class action lawsuit where a plaintiff's victory will yield a large cash award going mostly to the Plaintiff's attorneys, and those of us who feel aggrieved will get a $5 off coupon for an Intel processor or MSFT software. Ridiculous! Time to end this post--I've already wasted too much time on this stupidity.
Posted by AttyDGLaw | November 16, 2008 4:13 PM
I really do not see the big deal in this. I had no problem understanding that Vista-capable meant just that: capable. Yes, it will run. But barely. And I don't remember there being any doubt that the aero interface would not work on a "Vista-capable" PC. My PC at the time was "Vista-capable" and based on the information available at the time, I knew I wouldn't want to waste even a measly $99 for a Vista Home upgrade. And if Intel kept selling old inferior chips for longer, well, the consumer won because they were better off with XP anyway.
Posted by Ridley | November 16, 2008 4:28 PM
Reminds me of the Windows 95 release and after a year of putting it on machines that could barely run it , bill gates sprouted off about how the hardware would catch up with the software and he knew it. Too bad about all those people who bought Windows 95 with a pentium 75 and 8 mb of ram.
Back then people were ignorant about computers, the problem here is that people are used to having their computers perform adequately and vista didnt. And they didnt come clean about the real requirements needed to run vista.
Serves them right, rightly or wrongly i dont care. Thats what they get when they have wronged people for so long.
Hail China and their new age economic miracle and Red Flag Linux.
And americans can go back to the jungle and become like monkeys.
Posted by KitKat | November 16, 2008 7:50 PM
President Truman had a saying 'The buck stops here.' The CEOs of both companies need to take responsibility for this mess and apologize to impacted end users.
Hopefully both companies have learned there lesson this time.
Posted by JM | November 17, 2008 12:28 PM