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Follow UsPeter Henderson & Scott Hillis
LOS ANGELES: Microsoft Corp's Windows XP operating system hits stores October
25, raising high hopes for sales in the flagging personal computer industry -
but also fears that no one will buy a PC ahead of the rejuvenated operating
systems' release.
Some consumers might decide to wait for computers to be loaded with the new
software, stifling third quarter sales. To counter those concerns, Microsoft has
rolled out a "Windows XP Ready PC" program to qualify computers sold
now for the upgrade later. The top computer makers, potentially facing the
industry's first year of shrinking sales, said it was a good idea.
"The bottom line is we wanted to make sure nobody had an excuse for not
buying a Presario between now and the October time frame, when XP will get
preloaded on our systems," said Mark Vena, Compaq Computer Corp. Director
of Consumer Desktop Product Marketing.
XP, for eXPerience, features a cleaner looking screen, multimedia features
like a high-quality audio and video player using Microsoft proprietary
technology, and a supercharged instant messaging system to let users start video
chats or collaborate on documents with a couple of clicks.
And because it's based on the technology running the industrial-strength
Windows NT system, rather than the ancient DOS software, it promises to be far
more stable than previous consumer-targeted versions of Windows.
It runs best on souped up computers. Microsoft recommends a 300-megahertz or
faster processor and 128 megabytes of RAM, enough for many to consider buying a
new computer along with the operating system.
Consumers may just wait
There's plenty of concern that consumers may just wait to buy. "There
are a lot of conversations going on in the industry," said Mike Ritter,
Gateway Inc. vice president of marketing.
Compaq and Gateway both say they think they have any potential problem licked
with the XP-ready program and rebates - Compaq will give you the upgrade for $29
and Gateway for $15. Microsoft has not yet set a retail price for XP but it is
expected to sell for about $90, in line with past versions.
"If there were a lot of concerns from our part and from others that it
was really going to create a stall, we would have been trying to downplay
this," Gateway's Ritter said. Windows XP will be released in two versions:
one for home users and one for professionals, although businesses have generally
been happy with Windows 2000, the revamped corporate platform launched last
year.
"For the end user it (XP) will be easier to use. For an IT (information
technology) department you are looking at one scalable platform," that is
based on a stable technology, NT, said Achim Kuttler, director of corporate PC
business in North America for Hewlett-Packard Co. Intel Corp., the No 1 maker of
microprocessors, certainly hopes XP will push PC sales.
"It may give a boost in the second half of the year," Barrett said
on Monday, adding that whenever Microsoft released a new product with a
multimillion-dollar advertising blitz, "it has the possibility of boosting
the industry."
Will there be a boost at all?
Not everyone agrees. "XP is a whole new test and preparation cycle that
won't affect the corporate market until 2002 or maybe 2003," said Martin
Reynolds, an analyst technology research firm Gartner Inc.
"We believe Windows XP will hurt high end PC demand in Q3 (the third
quarter)," analyst Dan Niles of Lehman Bros. wrote in a recent research
note. There's also the broader question of whether XP will actually boost PC
sales, which some forecast will fall some 17 percent this year and would be the
first-ever decline in the industry's 20-year history.
"Every time Microsoft prepares to release a new operating system, there
are all sort of rumors and rumblings and anticipation what it will do for
hardware sales and the truth is that's only happened once," said SG Cowen
& Co. chip analyst Drew Peck, of the Windows 95 boosting PC sales.
"I just don't see XP as a driver for PC growth," he said. A PC
price war in full fury shows consumers are playing hard to get right now, but
Microsoft, which made a third of its sales from Windows last quarter, plans to
quadruple the amount of marketing it did for its last blockbuster, Windows 95.
The XP Ready PC plan stands to benefit Microsoft, because it creates an
incentive for people to buy two copies of Windows in a short period of time: one
already installed on their new machine, and then XP when it hits the shelves in
a few months.
Microsoft denies the program was crafted to boost sales. "Our objective
is to be able to accommodate the customer. It's not a way to pump up sales, it's
to make sure the customer has what they want," Windows product manager
Charmaine Gravning said in an interview.
"The Ready PC program is to be able to let customers know or plan for
their upgrades. It's for those who are trying to decide whether to buy now or
when XP comes out," she said. The agony may only be delayed, however, if
Microsoft does not ship XP on time. It has repeatedly said it would keep its
schedule, despite some uncertainty.
"Some are talking about the impact of delaying XP and what that's going
to do for them and I think they're pretty concerned," said chip designer
Transmeta Corp.'s Chief Executive Mark Allen on a Thursday conference call to
discuss a sales short fall, referring to notebook customers. "They're
scared if Microsoft will slip."
(C) Reuters Limited 2001.