It seems like just a few months ago Microsoft had the money to throw $10 million dollars at Jerry Seinfeld in a poorly conceived Vista ad campaign (see our coverage) that was so bad it was pulled before most people even saw it. Oh wait, it was just a few months ago. Those were heady days, last September. Vista has been blamed for many things, including taking so long to boot up and shut down that some employers stopped paying their employees for these “Vista breaks.” Now the apparently cursed operating system is being blamed for the layoffs of up to 5,000 employees. The layoffs were the largest in Microsoft’s history. Microsoft shares have dropped 40 percent in the last year. Analysts have noted that Microsoft is still seeing growth in many of its business areas, and some are saying that Vista’s underperformance is the critical reason for the company’s losses.

InforWorld's Tom Sullivan writes: “’Windows Vista didn't do well. Based on our data, a lot of clients are skipping Windows Vista,’ says Neil MacDonald, an analyst at Gartner. Indeed, nearly every other major analyst firm found a similar lack of Vista adoption, with Forrester Research likening the OS to the failed New Coke.”

The OS leads to even more financial woes.  Microsoft stands to lose as much as $8.5 billion in a class-action lawsuit against its 2006 “Vista Capable” campaign. The lawsuit alleges that Microsoft labeled a significant number of computers capable of running Vista, although their specs barely met minimal requirements.

This comes at a particularly bad time for the Redmond, WA, company.  For the first time in recent memory it has been getting good PR, while Apple's image is suddenly struggling, with the SEC investigating the Steve Jobs situation, and a poorly timed quarrel with Palm, whose Pre has unexpectedly become smartphone belle of the ball.  This quarrel hints at a lack of media savvy in Tim Cook, the face of Apple in Job's absence, which could lead to more image hits down the road.

Adding to Microsoft's PR blow is news that the layoffs mean the end of Flight Simulator, one of the longest running game franchises, in existence since 1980.

[credit photo:]

By Mark Alvarez