When we all first heard about Mac OS 10.5 at Apple’s 2006 WWDC, a few critics came out and suggested that the feature set wasn’t all that compelling. After all, a built-in backup application, a multiple desktop utility, enhancements to chatting and email software and perhaps a few added system tricks weren’t sufficient to tie an upgrade to.

On the surface, they may have been right, but it’s also true that Steve Jobs made it clear that the original disclosure of 10 new Leopard features didn’t represent everything. Sure, the claim that he didn’t want Microsoft to start their copying machines prematurely was just market-speak. After all, Mac developers would have to be fully apprised of everything in Leopard to make sure their applications were fully compatible, and, of course, that they took advantage of the new programming tools. And, as you know, one of the largest of those Mac developers is none other than Microsoft.

It may have been that, with Leopard so far off into the future as of the summer of 2006, Apple just didn’t have all the features present in a serviceable form to demonstrate publicly. It may even have been true that the entire slate of new features hadn’t been worked out yet.

Of course, we’ll never know for sure, and maybe in doesn’t matter all that much anyway. What is most important is not what could have been or should have been, but what actually makes it into the final release.

Story continued in this week’s Tech Night Owl Newsletter.

On the surface, if you’re a Microsoft stockholder, you’ll probably be reasonably pleased with their latest quarterly results, where higher revenue and profits were reported. All this despite the fact that they’re taking a $1 billion charge to cover the costs of fixing defective Xbox 360 consoles.

But it’s clear to me that the Redmond gorilla isn’t doing as well as they hoped. For one thing, they didn’t meet their goal of selling 12 million Xbox 360’s by the end of June. If you own one of these gadgets, you have to be concerned whether yours is going to fail next. No, this is not like some of the extended warranty programs Apple has had on note-books and other products. We’re talking here of dedicating roughly $100 in repair costs for each unit on a product that costs just a few hundred dollars. That’s one huge deal.

At the same time, the head of the Xbox division is taking a walk. Sure, it’s couched in the usual excuses that the executive, Peter Moore, is pursuing a more lucrative opportunity at Electronic Arts and wants to be closer to his family. But someone surely had to take a hit for the failures at Microsoft’s Interactive Entertainment Business division, and I can see where the buck has to stop somewhere.

Of course, you can’t expect a company, except in special circumstances, to admit that someone is being fired for being a screw-up. It just doesn’t happen very often.

Indeed, Microsoft has other issues that are threatening its dominance. Internet Explorer 7 debuted last fall as a “mandatory” upgrade to Windows XP users. It is the default, system-based browser for Windows Vista. Despite that, Mozilla’s Firefox continues to gain market share, especially in Europe. According to current estimates, in fact, Firefox is getting almost half the market in some countries.

Naturally, Microsoft will put the usual spin on the quality of its product and the value it offers to customers. But other than sites that require Internet Explorer to work properly, because of Microsoft’s proprietary components, just what value does Internet Explorer offer anyone? The ability to download malware without your permission?

I haven’t even added Apple’s Safari to the equation, because few are guessing just how well it’ll do on the Windows platform once the beta period is over. For now, it’s still a shaky release with enough bugs to put the kibosh on using it for regular browsing, and that’s not something only a Windows user is apt to say. I’ve tried the updated 3.0.2 version under Windows Vista  and I wasn’t overwhelmed. It’ll get there, but not yet.

Regardless, I am thinking that one solution to Microsoft’s problems may well be what TidBITS’ publisher Adam Engst suggested on this week’s episode of The Tech Night Owl LIVE, and that is that Microsoft might do well to spin off all but its core software business into separate companies. That would make it easier for them to jettison a division if its products didn’t succeed.

As it is, Microsoft rarely gives up anything. If something, such as the MSN online service, fails, they simply rename it to, say, Windows Live, develop a new marketing scheme, and continue to throw money at it.

Now, I can see the wisdom in nurturing a product in the hope that it will eventually become successful. Once the hardware defects are behind it, for example, the Xbox might become fairly profitable. It is, after all, a pretty good game console, according to most reviews.

The jury is still out on the potential for the Zune music player, however. Microsoft hasn’t said much about it lately, and one would think it would be time for a version 2.0 or some other variant to gain additional market share. At the same time, though, it would seem that whatever prospects the Zune might have are based on stealing sales from some of Microsoft’s PlaysForSure partners. I’m sure they aren’t pleased, but I can’t see that any of those companies would make a public break with Microsoft. They’ll either find new partners or put their best face forward and hope the Zune eventually goes away.

The same can’t be said for Dell, which has done a couple of things that cannot please Steve Ballmer and the rest of the crew at Microsoft. One was to once again offer a few models preloaded with Linux and the other was to allow customers to configure their new PCs with Windows XP rather than Windows Vista.

To be sure, aside from being bundled with most new PCs, it doesn’t seem that Vista has been the smashing success Microsoft hoped it would be.

This is not to say that Microsoft is a doomed company. It remains hugely profitable, but it also means they’ve got a lot of serious problems ahead that might some day change the financial picture considerably.

Sure, the company formerly known as Cingular Wireless widely advertises itself as having fewer dropped calls. Maybe they’re telling the truth, although they’ve had their share of quality and customer service problems in the past.

For the sake of argument, I’ll assume they are right, or at least that the incidence of dropped calls on their network is on par with Verizon Wireless and the other top-tier wireless providers. But one thing AT&T doesn’t talk about, and Apple’s silence is just as deafening, is the sound quality of the calls you actually make on the iPhone. This is something that isn’t discussed all that much, and it has to be a significant issue.

After all, you don’t buy wireless phones just for playing music, browsing the Internet and sending text messages. From time to time, you will make and receive phone calls, I suppose.

My limited experience in that area seems to indicate that the iPhone sounds pretty much the same as any other wireless phone. Some report an “echo” effect, which may be related to the way you hold the device, or some network issue. MacFixIt’s Ben Wilson will tell our listeners, in an interview taped for broadcast on the next episode of The Tech Night Owl LIVE, that voicemail audio quality is a little tinny. I haven’t heard that from anyone else, but will accept his report as being correct. He was, after all, an AT&T wireless customer before he bought his iPhone, so he is familiar with the level of service they provide.

So why did Apple forget what to many is the important feature of a mobile phone? It’s not as if they can’t do it. Look at all the technology embedded in the iPhone, from the intelligent touch screen to the visual voicemail. It’s even got the standard iPod EQ settings, so why can’t they add a setting, default or otherwise, to optimize the audio quality of an ordinary phone call?

Sure, call quality can vary all over the place, even during a single connection as the load on the cell tower and your location shifts. It may range from one’s voice being immersed in a haze of digital grunge to something that approaches the clear, crisp signal on a traditional land line.

But surely Apple can compensate for all this with its state-of-the-art operating system and the proper EQ tools. Wouldn’t that be something neat to advertise? The first wireless phone that actually sounds better than other wireless phones?

Or does Apple feel that filling the iPhone to the brim with lots and lots of cool playthings will make you forget hot pathetic calls sound on digital wireless networks?

Of course, you shouldn’t forget that the iPhone is actually a work in progress. Over time, there will be software updates to add features and fix bugs, such as the failure to display a fully charged battery when, in fact, it is full of juice.

Moreover, I don’t think that software to automatically optimize call quality is a terribly difficult thing to create. Take a look at any audio application, and some of the cool plugins, which are often available for free or just a small license fee, and you’ll see that the technology is already there. It just has to be applied to the specific requirements of a wireless phone call.

Apple, in fact, ought to be the best company to develop this capability. After all, they have created multimedia applications that are widely used in the entertainment industry.

But perhaps the biggest obstacle is easier to quantify. Maybe you just don’t care. All the ads that tout superior wireless service that I know about don’t mention call quality. Saying you have fewer disconnects isn’t the same thing, because there’s still no promise as to how good your caller’s voice will sound even when the connection is solid. Having the largest network doesn’t count either, because all that means is that you’ll be able to make a connection in more locations, without regard to connection quality.

However, it is true most people seem to hate their wireless phone companies. You consider yourself lucky if the bill is correct, and you can make and receive calls most of the time. But do you really have to settle for mediocrity?

We all know that Apple is the company that can empower you to master even the most sophisticated technology. So, how about an iPhone update that will make calls sound even better than a land line? Is that too much to ask?

Competition supposedly helps make good products great, and certainly it was nice to have both Connectix Virtual PC and Insignia’s SoftWindows years ago when you needed to run Windows on your Mac. But those programs were, at best, painful to run and you only used them in a pinch.

When Apple switched to Intel-inside, though, it was a whole new ballgame. Everything came in a rush. First, independent hackers found a way to install windows on a MacIntel, next came Apple’s Boot Camp, followed by Parallels Desktop, a virtual machine application, and CrossOver Mac. The latter let you use a Windows program, well of few of them anyway, without having to actually install Windows.

It took a few months before one of the largest players in the virtualization game, VMWare, decided to enter the fray. But being late to the party doesn’t mean that VMWare Fusion is bereft of features. In fact, it’s clear that Fusion is going hombre a hombre with Parallels Desktop, and we’ll all benefit from better and better solutions to run Windows and other operating systems on your Mac.

With a promised release date in late August, VMWare Fusion 1.0 RC1 is fairly complete, but still a ways from being worthy of final release status. But I’ll play down the problems for the most part, because they won’t be important unless they show up in the Golden Master.

However, a sharp look at this release candidate shows that VMWare and Parallels are watching each other very carefully, as the many of the features of the former mirror the ones in the latter. This is apt to generate lots of leapfrogging, and that’s just great.

The familiarity begins with Fusion’s installation process, which uses Apple’s Installer application and takes just a few minutes to wrap. Installing Windows Vista itself also compares favorably with the Parallels process. You specify the operating system in the setup screen, enter your login information and your Microsoft license key and insert the installer CD. After a couple of clicks, the installation proceeds all by itself without interruption.

I didn’t monitor the Vista setup all that carefully, but the Windows login screen was present and accounted for in roughly 45 minutes, which is about normal for the process.

Although a 1.0 version, VMWare Fusion has lots of powerful features, and I won’t continue the comparisons with Parallels unless there’s something drastically different to talk about. There’s experimental support, for example, for accelerated graphics, which uses Apple’s OpenGL technology to support DirectX 8.1. Alas, many of the newest PC games, and, in fact, Windows Vista, require later versions of DirectX, so you’ll have to wait for updates, which are likely forthcoming at some point or another, to provide full support.

Fusion’s Unity feature merges Windows applications with your Mac’s desktop, in the form of the Classic Mac OS. The PC apps even appear in the Dock, and you can keep them there for quick launching. This frees you of having to put up with two operating system interfaces, more or less.

One area where Fusion trumps Parallels is its support for two or more processor cores, which is configured as a virtual machine preference. The present version 3 variants of Parallels confine support for one processor core, although they are apparently considering a change in a future version.

Indeed, that extra multiprocessor support makes Fusion feel somewhat faster and more fluid than Parallels. What’s more, Fusion launches Windows in less time and it appears that PC software gets up and running in a snappier fashion as well. I also noticed that application installations were noticeably quicker. This is a somewhat subjective observation, though, and I await the final version to run a real comparison.

For a prerelease product, Fusion is pretty stable. I did notice some display artifacts when resizing a Windows application window in Unity mode, and I ran into a brief crisis, when the virtual machine stalled while restoring itself from the Suspend mode. To fix the latter, I actually had to go into the virtual machine file, using the Finder’s Show Package Contents feature, and surgically remove a pair of files that store the Suspend data. After that, things worked just fine, and I would assume this issue will be fixed in the final release.

The prerelease of Fusion will apparently be available for download until the final release is available from VMWare’s Mac site, and they have an active online community where you can learn troubleshooting tips and tricks, and just share your own experiences.

While I’m not about to say that Fusion is better than Parallels, VMWare has delivered a powerful contender for their first Mac product. They’ve clearly done their homework, and it shows. May the best application win — or, even better, may they both live long and prosper and continue to advance the state of the art.