The announcement hasn't been made publicly, but AppleInsider can exclusively report that according to a source within Hewlett Packard, Microsoft has granted the PC giant an extension to its existing rights to continue selling the nearly eight year old Windows XP on the company's business desktops, workstations, and notebooks in place of Windows 7 for another year.
Microsoft isn't excited about the XP extension, as the internal communique provided by the source stated, "Its important to remind customers that Microsoft are still planning to retire XP Pro Mainstream support on April 14th 2009 and will only provide OS security updates beyond that date unless the customer has an Extended Hotfix Support contract. MS Extended Support for XP Pro ends on April 8th 2014."
Out with the new, in with the old
Microsoft only allows Windows XP Pro or Windows XP Tablet to be bundled with new PCs as restore media, which the company refers to as an "XP downgrade." This enables the company to claim having sold a Windows Vista license for all new shipping PCs; it continues to insist that PC makers ship their machines with Vista pre-installed.
However, many PC makers prominently feature the "XP downgrade" as a feature of their new machines, although many will apparently will lose the ability to continue offering an alternative to Vista when their XP downgrade rights expire on July 31, unless they are also able to match the deal HP brokered with Microsoft.
Additionally, corporate PC customers frequently image all the computers they buy with a standardized, site licensed version of Windows customized for their needs. For many companies, this continues to be built upon Windows XP. Microsoft is particularly interested in moving these customers to Vista and its successor, Windows 7, despite their resistance to make the transition.
Windows 7 downgrade to "allow headroom"
Microsoft has billed Windows 7 as a completely new operating system, but company executives also admit publicly that the release is really a relatively minor update to Windows Vista.
"Windows 7," CEO Steve Ballmer stated, "is Windows Vista with cleanup in user interface [and] improvements in performance."
That means that many of the reasons customers have for not migrating to Vista will also be reasons for not wanting to shift to Windows 7, making the availability of an "XP downgrade" an important factor to vendors selling Windows PCs.
In mid February, Computerworld cited Michael Silver, an analyst with Gartner, as saying, "Downgrade rights are hugely important for Windows 7. Will Microsoft offer downgrades [from Windows 7] to XP? They've not answered that question yet. But it's really important."
HP's internal communique answers that question in the affirmative, at least for the company's business customers. "Microsoft will allow PC OEMs to structure similar downgrade OS SKUs for Win 7 Professional once available. No formal announcement has been made on the General Availability date for Win 7. However, you can anticipate that business desktops, notebooks and workstations will take advantage of this with the release of Win 7 in the October timeframe to allow our customers maximum headroom as they transition away from XP Pro OS. The Win 7 Professional to XP Pro downgrade OS will also discontinue on April 30th 2010."
XP rights for home users and netbooks still uncertain
Whether Microsoft will allow home users and other licensees apart from HP the right to sell new PCs with the bundled restore media to install a pre-Vista version of Windows still remains to be seen. If Microsoft does not, it may face pressure from PC makers and even push them to begin shipping Ubuntu or their own customized edition of Linux on new PCs, as Acer, Dell, HP, and others have already begun doing in the netbook market.
The inability of Windows Vista to run on netbooks 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. Microsoft has promised that forthcoming versions of Windows 7 would run acceptably on netbooks, but has yet to offer full specifics of how, or how much those netbook licenses would cost.
Ubuntu CEO Mark Shuttleworth welcomed the prospect of a level playing field in the netbook market, stating in an interview that "a decent edition of Windows  will mean Microsoft finally has to charge full price and that Redmond will finally stop allowing OEMs to use low-cost copies of Windows XP instead of paying full price for the full version of the official flagship - Windows Vista."