What does Microsoft EU decision mean for Vista and Longhorn?

We're doing some musing about this right now. In his press conference earlier, Microsoft Brad Smith announced that Microsoft would continue to sell the Windows Media Player-free versions of Windows – Windows XP-N and Vista-N. However the whole issue of these so-called 'N' releases have been a farce with retailers doing little or nothing to promote them. They are simply versions of Windows without something that cost practically the same – where is the motivation for the consumer? All in all the Windows-N decision was a pretty toothless one from the EU. What we should have had was Windows-N as the default option and consumers forced to ask for Windows Media Player bundled versions.

However –the Media Player debate seems pretty old-school now. This EU ruling might not have gone Microsoft's way – but legislation and fines is not what the company is really worried about now.

It needs Vista and the server offering Longhorn to be a success – and given this EC ruling it's going to be a tougher mission than for any previous OS release from Redmond. Not only are serious curbs now in place to stop it using its dominance to plough market share for Vista and Longhorn but Google, Apple and Linux (server and a resurgent desktop) mean that the natural upgrade to the next Microsoft offering is no longer the automatic decision it once was.

More worryingly for MS, a real feeling in the market has taken hold that it has lost whatever innovative direction it might have had and just has nothing to offer when it comes to competing with Apple's brilliantly realised consumer offerings and Google's complete dominance of the Internet – and increasing office productivity tools. Microsoft is rapidly being painted into a corner – with no real idea of how to get out.