A hot debate is raging over what Microsoft should do with Windows XP.  Windows Vista is simply not viable for low-end PCs that are a mainstay of the consumer home computing market.  Windows XP was originally scheduled to be discontinued in January 2008.  In preparation for this phase out, most retail computers were to be loaded with Vista. 

However, the lawsuits and negative feedback that ensued from underperforming computers struggling with Vista, led Microsoft to reconsider and offer XP "downgrades".  It also gave XP a stay of execution until June 2008, sixth months after the planned date.

June 2008 is fast approaching and now Microsoft is faced with the dilemma of whether to officially retire the OS or further extend its career.  In Belgium on Thursday, Steve Ballmer spoke to reporters about the OS's fate.  He indicated that while customer demand could extend the life of the OS, currently he did not see customers demanding it, and he felt that unless something changes, XP would be headed the way of the dinosaur.

He stated, "XP will hit an end-of-life. We have announced one. If customer feedback varies we can always wake up smarter but right now we have a plan for end-of-life for new XP shipments."

All retail sales and licensing, under the current plan, will end June 30.  Ballmer said that despite difficulties, most retail computers today are being sold with Vista, and most customers prefer Vista.

However, some customers portray a different story.  They say that they were unable to buy XP in stores.  Further, they say that in order to get XP they had to buy their computers as small businesses.  It is indeed true that XP is virtually nonexistent at large retailers such as Best Buy and Circuit City.

Ballmer acknowledged there was business sector demand for XP still.  He says this is driven by the fact that the IT industry frequent heavily employs older or outdated hardware.  He states, "In the business environment, we still have customers who are buying PCs with XP."

Ballmer was also questioned by reporters about if Microsoft would appeal the landmark $1.4B USD fine from the EU.  Ballmer simply remained mum, stating, "I really have nothing to say about that today, sorry."

Microsoft would have to appeal the ruling to the European Court of First Instance by early May at the latest.  The European Commission imposed the fine due to the fact that it found that Microsoft was using pricing anti-competitively to drive rivals out of the market.

Steve Ballmer was in Belgium for the opening of a new "innovation center" in the city of Mons.  Google has a data center in the same city, but Ballmer says that is not why it was selected.

Ballmer also reaffirmed that if Yahoo would not accept its buyout offer, Microsoft would seek to oust the company's board of directors.  He stated, "We've sent them a letter that says, 'it's a good price, please let us know. If you don't let us know, maybe your shareholders will think it's a good price."

By far the most interesting insight he provided though was his outlook on XP.  Microsoft already caved in to extend the life of Windows XP Home only for ultra-low-cost PCs (ULPCs) until June 30, 2010. Whether Microsoft will have a change of heart for the remaining versions of XP remains to be seen.

And the sooner Microsoft retires XP, the sooner it can fully focus on releasing Windows 7.  The new OS, which is scheduled tentatively for 2010, promises slimmer builds, which may help relieve Microsoft's hardware woes.  Still, two years is a long time to wait in the consumer market.