Dell announced that it would be offering XP again on home PCs. The second that Vista came out, Microsoft makes it very hard for you to sell anything other than MeII. It can't do this on the business side because it would be laughed out the door, but for the walking sheep class, well, you take what you are shovelled.

This is classic abusive monopoly behavior, Microsoft wrote the modern book on it. It pulled all the major OEMs in by twisting their arms with the usual methods, and they again all fell into line. Never before has anyone backpedalled on this, to do so would earn you the wrath of Microsoft.

But Dell just did. This means that MeII sales are at least as bad as we think, the software and driver situation is just as miserable, and Dell had no choice but to buck the trend. If anyone thinks this is an act of atonement for foisting such a steaming pile on us, think again, it doesn't care about the consumer.

What happened is the OEMs revolted in the background and forced Microsoft's hand. This is a big neon sign above MeII saying 'FAILURE'. Blink blink blink. OK, MeII won't fail, they have OEMs whipped and threatened into a corner, it will sell, but you can almost hear the defectors marching toward Linux. This is a watershed.

The other equally monumental MeII failure? Gates in China launching a $3 version of bundled MeII. Why is this not altruism? Well, it goes back to piracy and how it helped enforce the MS monopoly. If you can easily pirate Windows, Linux has no price advantage, they both cost zero.

With MeII, Microsoft made it very hard to pirate. It is do-able, you can use the BIOS hack and probably a host of others, but the point is, it raised the bar enough so lots of people have to buy it. Want to bet that in a country with $100 average monthly salary, people aren't going to shell out $299 for MeII Broken Edition?

What did MS do? It dropped the price about 100x or so. I can't say this is unprecedented, when it made Office 2003 hard to pirate it had to backpedal with the student edition for about $150. This time though, things are much more desperate.

If you fit Microsoft's somewhat convoluted definition of poor, it still wants to lock you in, you might get rich enough to afford the full-priced stuff someday. It is at a dangerous crossroads, if its software bumps up the price of a computer by 100 per cent, people might look to alternatives.

That means no MeII DRM infection lock in, no mass migration to the newer Office obfuscated and patented file formats, and worse yet, people might utter the W word. Yes, you guessed it, 'why'. People might ask why they are sticking with the MS lock in, and at that point, it is in deep trouble.

So, it did the unthinkable, and dropped the price. I won't bother to hunt down all the exec quotes saying how people can't afford clean water would be overjoyed to sell kidneys to upgrade to the new version of Office, but they are out there. This was a sacred cow, and it is now hamburger backed up against the wall.

These two actions by Microsoft are proof of what I suggested three years ago. Microsoft has lost its ability to twist arms, and now it is going to die. It can't compete on level ground, so is left with backpedalling and discounts of almost 100 times.

What we are seeing is an unprecedented shift of power. It is also an unprecedented admission of failure. And the funniest part about the moves made? They are the wrong things to do. Microsoft is in deep trouble.