With Windows Vista and Windows XP concomitantly available on the market, the Redmond company inherently catalyzed the comparison between the two Windows clients. But the fact of the matter is that the benchmarks, comparisons of features, capabilities, market shares and security vulnerability measuring contests performed since Vista became available have managed to hurt Microsoft's Windows business where it counts more. In the end, the repercussions of the constant Vista RTM vs. XP SP2 which grew into the smackdown of Vista SP1 and XP SP3 have unfavorably impacted the Windows client total revenue and operating income.

On April 24, Microsoft published its financial results for the third quarter of the 2008 financial year, and the picture is bleak to say the least when it comes down to the Windows client division, including both Windows Vista SP1 and Windows XP SP3. "Client revenue decreased during the three months ended March 31, 2008, primarily reflecting revenue of approximately $1.2 billion recognized during the third quarter of the prior fiscal year upon the January 2007 release of Windows Vista to consumers," Microsoft stated.

In the quarter ended March 31, 2008, Windows client revenue amounted to just $4,025 billion, having plummeted no less than 24% compared with the similar quarter of the past year. Back at the end of March 2007, Windows client accounted for no less than $5,274 billion in revenue, which translates into a difference of $1.2 billion. Operating income dropped 26% from $4,204 billion in Q3 2007 to $3,097 billion in Q3 2008.

"Client revenue increased during the nine months ended March 31, 2008, primarily reflecting licensing of Windows Vista. During the three months ended March 31, 2008, OEM revenue decreased $1.1 billion or 25%, primarily reflecting revenue recognized during the third quarter of fiscal year 2007 related to the technology guarantee program, partially offset by a 5% increase in OEM license units," Microsoft added.

Microsoft continues to see the largest portion of Windows client revenue coming from operating system copies that ship preloaded with OEM computers. Even though machines from original equipment manufacturers saw an overall growth of just 8% to 10% worldwide, Windows OEM revenue jumped by $1.3 billion or 14%. However, Vista sales, even with the advent of Service Pack 1, failed to match those of the Vista RTM. And the fact that, as of April 21 Windows XP SP3 RTM is added to this equation, does not deliver good signals for future market performances of the Vista SP1 client.

"Revenue from commercial and retail licensing of Windows operating systems decreased $146 million or 18% during the three months ended March 31, 2008, primarily reflecting revenue recognized during the third quarter of the prior year related to the January 2007 consumer launch of Windows Vista. Revenue from commercial and retail licensing of Windows operating systems increased $71 million or 4% during the nine months ended March 31, 2008, primarily due to sales from Enterprise Agreements and anti-piracy efforts in emerging markets," Microsoft added.