Analyst: Minus deal with EU, Microsoft would still ship Windows 7 with IE

Microsoft could meet Oct. 22 ship date; might have to tweak browser ballot screen plan

If Microsoft can't strike a deal with European Union (EU) antitrust regulators over Internet Explorer (IE) before Windows 7's scheduled Oct. 22 launch, the company will most likely ship the browser with the new OS anyway, an analyst said today.

Although Microsoft showed enough confidence in its latest proposal to the European Commission that it ditched the idea of shipping Windows 7 without a browser, there's a chance the two sides won't reach agreement before the operating system goes on sale two months from Saturday.

"If that happens, Microsoft would most likely still ship IE with Windows 7," said Rob Helm, an analyst at Kirkland, Wash.-based Directions on Microsoft. "But it might have to deliver something more than the ballot screen that they've proposed. Like the current ballot screen proposal, that could be delivered as an update after Windows 7 is released."

Earlier this month, Microsoft scrapped plans for Windows 7E, a special edition for the European market that would ship without IE8, the browser slated to be bundled with Windows 7 in the rest of the world. It dropped Windows 7E, Microsoft said, because it was confident Brussels-based antitrust officials would accept its proposal to instead offer a so-called browser ballot screen.

The ballot screen would offer users a choice of at least five different browsers -- IE8, Mozilla's Firefox, Apple's Safari, Google's Chrome and Opera Software's Opera -- the first time they tried to connect to the Internet.

EU regulators had been pushing for such a screen since they filed charges in January against Microsoft for tying IE to Windows.

The ballot screen, however, is not a slam dunk. Both Opera and Mozilla, the latter just yesterday, have criticized parts of Microsoft's proposal.

"Microsoft has clearly decided to go with the provisional deal," said Helm, referring to the ballot screen proposal. "It intends to ship Windows 7 with IE8, and it's obviously confident that it can find some kind of terms with the EU."

But what's Microsoft's move if it cannot strike a deal with the commission? Would Microsoft delay Windows 7?

Helm said no. "That seems really unlikely," he said. "They'll comply with orders, of course, but from all indications the two sides have gotten closer together with the ballot proposal."

Rather than delay Windows 7 -- a potentially crippling decision given Microsoft's shaky revenues from its Windows client group the last three quarters -- Helm sees the company making whatever changes the EU demands to the ballot screen, then pushing it out as a software update after the new OS reaches users.

"They don't want to entomb a legal solution in a product that [antitrust regulators] might not accept," Helm said, talking about Microsoft's current plan to ship the browser ballot as an update to Windows 7 on its launch date, Oct. 22. Windows XP and Vista users, meanwhile, would get their ballot screen updates three-to-six months later, according to Microsoft's proposal.

"They might have to put more teeth in the ballot screen," acknowledged Helm.

Among concerns expressed Tuesday by a trio of Mozilla executives, including its former and current CEOs as well as its head counsel, were a demand for a guarantee from Microsoft that it wouldn't use the Windows Update service to later coax users into switching back to IE; that it should delete IE's explicit ties to other Microsoft software, particularly Office; and that it would actually disable IE when users selected a rival browser.

EU regulators have not set a timetable for a final decision on Microsoft's proposal, but sources close to Microsoft have said they expect a resolution before the end of October, both because of the launch of Windows 7 and because the current commissioner for competition, Neelie Kroes, steps down Oct. 31.

"Unfortunately, a lot of this is out of our light," noted Helm. "It's totally different than if U.S. officials were demanding Microsoft make changes."

Copyright © 2009 IDG Communications, Inc.

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