This cannot be good.

Intel Corp. (INTC) Chief Executive Officer Paul Otellini told employees in Taiwan that Microsoft Corp.’s Windows 8 operating system is being released before it’s fully ready, a person who attended the company event said. Improvements still need to be made to the software, Otellini told employees at a company meeting in Taipei today,

If anyone should know, it is Otellini. He is also on Google’s Board of Directors, and he might be feeling some of the sting from the ARM-based Windows RT. Still: Ouch.

Many believe Microsoft’s Windows 8 strategy is reactionary and being dictated by the success of the iPad.

Update: Intel denied in a press release this afternoon the statements:

Intel has a long and successful heritage working with Microsoft on the release of Windows platforms, delivering devices that provide exciting experiences, stunning performance, and superior compatibility. Intel fully expects this to continue with Windows 8.

Full PR below:

Today Intel Corporation issued a statement in response to unsubstantiated news reports about comments made by Intel CEO Paul Otellini in a meeting with employees.

Intel has a long and successful heritage working with Microsoft on the release of Windows platforms, delivering devices that provide exciting experiences, stunning performance, and superior compatibility. Intel fully expects this to continue with Windows 8.

Intel, Microsoft and our partners have been working closely together on testing and validation to ensure delivery of a high-quality experience across the nearly 200 Intel-based designs that will start launching in October. Intel CEO Paul Otellini is on record as saying “Windows 8 is one of the best things that ever happened to Intel,” citing the importance of the touch interface coming to mainstream computing and the huge wave of exciting new Ultrabook™, tablet and convertible device innovations coming to the market.