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posted: 9/29/2012 7:33 AM

Windows 8 bugs hurt Microsoft, Intel CEO said to tell staff

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By Tim Culpan and Ian King
Bloomberg News

TAIPEI, Taiwan -- Intel Corp. Chief Executive Officer Paul Otellini told employees in Taiwan that Microsoft's Windows 8 operating system is being released before it's fully ready, a person who attended the company event said.

Improvements still need to be made to the software, Otellini told employees at a company meeting in Taipei, said the person, who asked not to be identified because the meeting was private.

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Microsoft is eager to get Windows 8, the first version of its flagship software designed for touch tablets, into computers next month to help it vie with Apple's iPad during the holiday shopping season. Releasing the operating system before it's fully baked is the right move, and Microsoft can make improvements after it ships, Otellini told staffers.

Intel, the biggest semiconductor maker, is Microsoft's closest partner, and Otellini's remarks echo criticism from analysts such as Michael Cherry at Directions on Microsoft. While Windows is fundamentally sound, the operating system lacks a wide range of robust applications and PC makers haven't had enough time to work out kinks with so-called drivers, which connect software to such hardware as printers, Cherry said.

"We are concerned at the level of bugs and fine tuning that appears necessary to get the beta systems we demoed ready for prime time," Alex Gauna, an analyst at JMP Securities in San Francisco, wrote in a Sept. 13 note in response to versions of Windows 8 shown at Intel's recent developer forum.

Technology vendors often release software before it's completely ready and make adjustments on the fly. Still, the practice can backfire. Vista, a version of Windows that debuted in 2007, was introduced two years late. It was met with poor adoption as the software initially didn't work with many applications and drivers.

"With over 16 million active preview participants, Windows 8 is the most tested, reviewed and ready operating system in Microsoft's history," said Mark Martin, a spokesman for Redmond, Wash.-based Microsoft.

Laura Anderson, a spokeswoman for Santa Clara, Calif.-based Intel, declined to comment on the internal meeting. She also said that the company "believes Windows represents a tremendous opportunity for our business and we're looking forward to working with Microsoft on enabling a host of new experiences on a variety of devices."

During the meeting, Otellini declined to elaborate on the company's outlook following the announcement this month that it's cutting the third-quarter revenue forecast. Lackluster demand for PCs won't be bad enough to cause the company to lay off workers, and the market will grow in 2013, he said.

Intel said on Sept. 7 that third-quarter sales will be $12.9 billion to $13.5 billion, from a prior projection of $13.8 billion to $14.8 billion. Analysts on average had estimated sales of $14.2 billion, data compiled by Bloomberg show.

Intel said orders in emerging markets and demand for chips used in business machines are lower than expected, compounding concern that the PC market may not grow this year as consumers flock to smartphones and tablets.

Microsoft plans to release Windows 8 on Oct. 26.

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