Vista Capable lawsuit damages to Microsoft could be $8.5 billion

News today is circulating that Microsoft might have to come up with between $3.92 billion and $8.5 billion to pay customers caught by its 2006 "Vista Capable" marketing program, according to documents unsealed by a federal court. U.S. District Court Judge Marsha Pechman released the figures yesterday from the class-action lawsuit, which claims Microsoft misled consumers with its Vista Capable marketing campaign in the months leading up to the operating system's January 2007 release.

However, this estimate is based on certain assumptions of what the court would require Microsoft to do if the court found it guilty. This estimate came from Keith Leffler, the University of Washington economist, and witness for the plaintiffs, that also calculated Microsoft earned $1.5 billion from the Vista Capable campaign. It is based on the idea that Microsoft would have to pay for each customer to upgrade the Vista capable-labeled PC to minimum standards of 1GB of memory and a graphic card capable of running Aero. This would cost a maximum of $155 to upgrade each desktop, and between $245 and $590 to upgrade each notebook.

Such a solution begs the question -- exactly how much were consumers damaged by buying a PC that capably ran XP prior to the release of Vista? Given the ongoing popularity of XP even today, the answer has to be -- not much. And that should be the basis by which any judgment is metered out.

The likelihood that Microsoft escapes this lawsuit without a dent to its cash flow is low, in our opinion. And perhaps rightly so. Microsoft's missteps with Vista are almost countless at this point, beginning from the Capable marketing program through the OS's failure to empress Microsoft's bread-and-butter enterprise customers. But Redmond's punishment, should it be found guilty, should make sense. An $8.5 billion settlement which requires consumers to upgrade years-old hardware is, by contrast, nonsense.


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