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The response is surprising, because Media Center integration into Vista was supposed to benefit Microsoft, its customers and partners. But that's not how this OEM sees it. The reasoning? The distinct SKU's disappearance makes Media Center differentiation more difficult among OEMs, so there is no real competitive advantage. The product executives expressed concern that Media Center promotion for the OEM's products might benefit competitors.

The conversation was a broad indictment of Microsoft's whole Vista SKU strategy. Rather than differentiate products around Vista SKUs, the OEM has instead returned to emphasizing performance metrics and made product design a greater priority. That's opposite the intention of Microsoft's Vista SKU strategy, which was supposed to encourage greater differentiation around operating system capabilities.

Before Microsoft finalized its Vista SKU strategy, I recommended going out with one version. At the time, I was working as an analyst and Microsoft product managers sought my advice. My thinking: Consumers buying at retail could get the one Vista version and even businesses could do likewise but through volume licensing. OEMs could license blind SKUs and even mix or match them, so that they could differentiate based on functionality. OEM pricing would be based on the features picked from the Vista menu, so to speak.

So, an OEM could release a Tablet/DVR hybrid with Tablet PC, Windows Media Center and even Windows SideShow functions for one price from Microsoft, but pay something less for the core operating system without these functions. The idea is to spur innovation in design and functionality around the operating system while creating more differentiation among PCs.

Microsoft chose a different approach, one that essentially made Media Center and Tablet PC functions invisible within the operating system. So, Vista Business has Tablet PC functions, which are wonderful for tablet users but useless code for anyone else. Maybe a different SKU strategy would have worked better. But who can say?

The invisibility of these functions also highlights major shortcomings of Microsoft's bundling strategy: Too many functions are too hard to find and they're even tougher to sell. Media Center had identity as a separate SKU; it's now lost within Vista Home Premium or Ultimate. Separate rather than integrated is the better way, or, if integrated, then branded is a necessity.

Apple has found better balance than Microsoft. Apple's major digital applications ship with new Macs, but as a separate suite rather than integrated features. Apple also brands some Mac OS X features, which are then more easily marketed than comparable Vista functions. Apple's search feature is Spotlight and Vista's is, well, Search. Mac OS X backup function is Time Machine while Vista's main counterpart is Backup and Restore Center. And so on.

Microsoft's approach is to integrate into Windows a bunch of nondescript features. But the approach gives them little distinct identity and makes them more difficult for customers to find. That said, there are signs of life with, eh, Live. Through Windows Live, features such as mail, messaging, photos and some others now have distinct identities and even some branding. I say some because Windows Live won't win any branding awards. From a marketing potential perspective, Windows Live is death. It's a tough sell, short of the "Windows" brand connection.

Some Microsoft partners are much better at marketing integrated products than is the software giant. For example, from one perspective, printers are integrated products. From a brand and revenue perspective, the essential component is the ink. Printers are increasingly more capable while costing less. But the ink costs a whole lot more, because manufacturers have adopted a kind of razor and blades model. Companies like Gillette charge more for and make more from the blades than the razors. The same could be said about printers and printer ink.

I recently bought an Epson RX680 all-in-one printer, scanner and copier for $150 at the local Fry's Electronics. Six replacement cartridges cost more than 80 bucks, or more than half the printer's cost. For some printers selling for under $80, replacing the entire printer would cost less than buying more branded ink.

To differentiate and to compete against cheaper, third-party inks, some printer manufacturers brand their inks—Claria for Epson and Vivera for HP. Epson and HP give their inks brand identity and emphasize the value of their inks for providing vibrant color photo prints.