Paul DeGroot, an analyst with Directions on Microsoft, said for most consumers using legal copies of Windows XP, WGA probably "wasn't much of an issue."

The bigger problem is one of perception, especially after the spyware accusation, he said. "For WGA to phone home everyday was causing problems for some people," DeGroot said. "Microsoft may have blown a lot of credibility here."

Rather than attack the problem of pirated consumer copies of Windows, Microsoft with WGA is targeting volume licenses of Windows purchased by corporations that have been leaked out to non-legal users, he said.

With copies of Windows purchased in retail stores or pre-installed on consumer PCs, each Windows CD is accompanied by an individual activation key. Through the Internet, Microsoft can track how many PCs have been installed using that particular key.

But when corporations buy volume licenses, they receive a single key that's used to install Windows on hundreds or thousands of machines.