More trouble for Microsoft's Vista

Microsoft Corp. (NASDAQ:MSFT) has had a resurgence of sorts. The stock trades near $30, up from a 52-week low of $21.46. There is excitement in some quarters that Xbox has gained enough traction to challenge Sony Corp.'s (NYSE:SNE) Playstation franchise. While the Zune is not a huge success, it is evidence that Microsoft intends to seek share in the consumer electronics markets. MSFT is even saying it will be more aggressive in promoting advertising at its MSN franchise.

Despite all that, Microsoft's new operating system, Windows Vista, has to sell well. Without OS licensing revenue, Microsoft might as well be a stripped down version of IAC/InteractiveCorp. (NASDAQ:IACI), Barry's Diller's largely failed attempt to be a front line Internet success.

Yet, Vista is beginning to show cracks, even in early release. Several serious bugs have been reported including one in the browser that could allow "rogue software" into PCs.

Since Microsoft has said that Vista is more secure than its predecessors, the news could be a disaster in the making.

The news could be equally bad for the IT industry. Research firm IDC estimates that Vista will produce $70 billion in revenue in the tech sector during 2007.

If Vista has a serious flaw, take a lot of the economic benefit away, along with a number of dollar off MSFT's stock.

Douglas A. McIntyre is a partner at 24/7 Wall St.