When a new market of small-factor computers became very popular last year, Microsoft wasn't feeling too hot. Linux and Windows XP were being used, and the consumers buying these PCs were not able to take advantage of all the hard work that had gone into Vista. It didn't matter that with Vista SP1, the operating system was running better than its XP on higher-end machines. New computers don't necessarily mean better, faster, stronger anymore. Netbooks mean smaller, cheaper, lighter, and many consumers are quite happy to use XP, the operating system they had gotten used to during Vista's unusually long development. Microsoft simply did not foresee this new trend occurring when it was working on Vista; the demand for the inexpensive netbooks began to skyrocket even before the economic downturn.
Full Story: http://arstechnica.com/microsoft/news/2009/03/dear-netbook-thank-you-for-windows-7.ars