Gates takes wraps off Windows XP

NEW YORK--Microsoft on Thursday officially launched Windows XP, the newest version of its operating system and what could be the company's most important product in more than six years.

The long-anticipated operating system, which Microsoft says improves performance, reliability and ease of use, is available at retail as of Thursday.

Microsoft ushered in Windows XP with a lavish extravaganza in New York. Microsoft, chipmaker Intel and PC makers are expected to spend a combined total of more than $1 billion on marketing for Windows XP.

Chairman and Chief Software Architect Bill Gates, accompanied by PC industry executives and New York Mayor Rudolph Giuliani, announced Windows XP at Times Square's Marriott Marquis Theatre.

"Today is a great day for PC users and a great day for the PC industry," Gates said. "There's only one place to launch Windows XP, and that's right here in the heart of New York City," said Gates. Referring to the terrorist attacks of Sept. 11, Gates said: "New York is back and open for business."

Giuliani said: "I want to thank Bill for doing this launch in New York City. It shows a tremendous amount of confidence in the city of New York."

Former New York City Mayor Ed Koch, television personality Regis Philbin, Starbucks Chairman Howard Schultz, and Intel Chief Executive Craig Barrett took part in the launch. Microsoft also hired musician Sting to play a midday concert in New York's Bryant Park.

Microsoft has a lot riding on XP's success: The operating system ushers in new features tied to Microsoft's long-term strategic plans for media player software, digital photo tools and online services. Many analysts said the new operating system was the most important release of Windows since Windows 95, the forerunner to Internet Explorer and other Internet connectivity features.

Windows XP is also the first operating system to test key components of Microsoft's widely publicized .Net strategy to connect all of its products and properties, as well as the basic technologies behind it: .Net My Services, the overall software architecture for Microsoft services, and Passport, the mechanism designed to let consumers use all the services.

"In many ways this (Windows XP) is a transition. This new term--XML Web services--you will be hearing more and more about that because Windows XP lays the foundation for that," Gates said.

The company also launched Microsoft Plus for Windows XP, a bundle of add-on tools and features, such as voice recognition for Windows Media Player, and several audio enhancements. The software is estimated to cost $39.95 at retail.

PC makers and software-application sellers are counting on Windows XP to revive sales in the slumping technology market.

But, based on analyst estimates and comments from CNET News.com readers, XP may get off to a sluggish start.

	New York Mayor Rudy Giuliani thanks Microsoft's Bill Gates for hosting the Windows XP launch in the city. (5:31) Play clip

Research firm Gartner predicts that most consumers won't switch operating systems until they buy new PCs. Gartner predicted tepid initial sales, which would be in line with the lukewarm reception received by Windows Me and Windows 2000 last year.

Dell Computer Chief Executive Michael Dell on Thursday said he expects consumer demand for personal computers to drive the company's sales higher in its fiscal fourth quarter.

"We expect to increase our sales in the fourth quarter, and it's driven again--once again--by the consumer first," Dell said during a CEO roundtable at the Windows XP launch, Reuters reported.

Computer makers started selling XP PCs Sept. 24.

Gartner analysts Michael Silver and Charles Smulders say that even for the rest of this year, the $500 million hype campaign surrounding the launch of Microsoft's new operating system won't be enough to increase PC sales very much. see commentary

Part of Microsoft's effort to fight piracy, product activation requires consumers to "lock" a copy of Windows XP to a particular PC by submitting information to Microsoft over the phone or the Internet. Many people are reluctant to use activation for privacy reasons.

Not all the news is grim, however. Online retail giant Amazon.com reported that Windows XP had the most advance orders of any nongame software ever offered. The Home and Professional upgrade versions and add-on pack Plus! for Windows XP have taken the top three software sales slots since Oct. 1, Amazon reported.

In order to spur XP sales, Microsoft, PNY and Symantec announced Thursday that consumers could get a free memory upgrade and antivirus software with the purchase of Windows XP Professional at any Best Buy, CompUSA, Office Depot or Staples store. Also, Microsoft, Kingston Technology and Network Associates announced that consumers would receive free memory when they purchase Windows XP Professional at all Office Max, Office Depot and Best Buy stores.

What's new?
Windows XP will come in two versions: Home and Professional. Although they appear identical, the Professional version offers more sophisticated networking, better security and support for multiple processors.

Windows XP Home Edition will be available as an upgrade version for $99. The full version of the OS will cost $199. Windows XP Professional will cost $199 for the upgrade and $299 for the full version, according to Microsoft.

Some other highlights of Windows XP:

• Performance: XP derives its heritage from Windows NT/2000, which manages memory better than Windows 95, 98 or Me and runs multiple programs at the same time more easily. The new operating system is designed to be more crash resistant than previous versions of Windows.

• Backward compatibility: A feature called Compatibility Mode installs or runs programs in a way that fools them into thinking they are working with Windows 95, 98, Me or 2000.

Jim Allchin, group vice president of the Microsoft Platform Group, says there are "stringent requirements" on what Microsoft can do with user data. (5:31) Play clip

• Better text: For those using LCD monitors—with either desktop or notebook PCs—ClearType technology offers substantially sharper text than any other Windows version and most other operating systems.

• Multiple desktops: Unlike earlier Windows versions, XP allows several people—each with a custom desktop—to be signed in simultaneously on the same computer. Switching desktops takes a few seconds without disrupting activity. In a home with only one PC, mom can check her e-mail while the kids download MP3s.

• Better drivers: XP enforces stricter guidelines for hardware makers writing device drivers, a move expected to improve stability.

• Stronger security: Both versions of XP have firewalls offering basic protection when connected to the Internet. Professional includes more sophisticated security, such as file encryption and restricted access.

• Digital imaging: Handling digital images will be much easier with XP than with earlier Windows versions. Microsoft also will provide digital images ordered over the Internet for an additional cost.

News.com's Joe Wilcox contributed to this story.