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The week in review: Windows shopping

Microsoft shakes up the software world by announcing a new release date for its much-anticipated operating system and shifts in strategies and licensing programs.

Microsoft shook up the software world this week by announcing a new release date for its much-anticipated operating system and changes to its licensing programs that could leave businesses with a higher software bill.

The software giant revamped its software licensing program for most business customers, effectively raising the cost of upgrades by as much as 107 percent, analysts said.

Under the new licensing agreements, Microsoft will encourage customers to enter "software assurance" contracts that will effectively commit them to buying operating system and application upgrades for an annual fee. Additionally, Microsoft will also lease software through annual subscription contracts, rather than sell software outright. One analyst said that if a business wanted to upgrade its software every four years, it might be cheaper to just buy the complete version of the product.

Software upgrades were a hot topic this week, as a market research company warned businesses that if they didn't start Windows 2000 upgrades by the end of the quarter, they should scrap plans and possibly wait for the release of Windows XP. Microsoft will soon cut support for the operating system, prompting an analyst from Gartner to tell companies "if you haven't started Windows 2000 upgrades by the second half, you should really consider whether Windows XP is a better fit."

Microsoft's software rivals could benefit as business customers digest the changes and possible affects the new licensing deals could have on their pocketbooks. Competitive operating systems such as the open-source Linux system could find themselves becoming more popular in the business community. "I think it gives us more opportunity," said James Neiser, chief marketing officer for Linux leader Red Hat.

Separately, Microsoft announced it would release Windows XP on Oct. 25. The launch date for the system, which is expected to act as a catalyst for PC sales, has been a moving target in recent weeks. The software giant had shifted the release of final code to PC manufacturers as many as three times.

In more XP news, the company temporarily nixed a controversial plan to sell Office XP on a subscription basis to some U.S. customers. The surprising turn in positioning comes less than a month before Office XP's official May 31 launch and days after Dell Computer started offering the productivity suite on new PCs.

The song remains the same
AOL Time Warner's America Online and Microsoft's MSN Network are entering a battle of the bands as they increasingly turn to recording stars to promote their online services. MSN will host pop superstar Janet Jackson in an online chat and give MSN subscribers the chance to purchase a limited number of presale tickets to her concert tour. America Online, meanwhile, has been aggressively pushing stars from AOL Time Warner's stable of musicians, notably offering presale tickets to subscribers this week for Madonna's highly anticipated concert series scheduled to kick off this summer. The concert wars highlight the growing importance of music in the race for dominance on the Web.

A new version of Napster's file-swapping software adds another potentially powerful tool as the company attempts to keep copyrighted works from being traded. The software can read the sonic characteristics of a given song file. Napster can block a file from being traded through its service based on that identifying information. The company, which licensed this technology from Virginia-based Relatable last month, told visitors to its Web site that it was adding the feature as a way to stay on the right side of a court's order.

Disaster call
This week Cisco Systems provided the grisly details behind its astonishing $2.25 billion inventory write-off in the third quarter, essentially admitting that it too was caught up in the Internet hype that, at its peak, gave the company the highest market capitalization in Wall Street history.

Networking executives have all tweaked their business strategies and made cutbacks, but there's one area they refuse to slash: research and development budgets. Like others in the technology sector, networking executives say they must stay aggressive with technology innovation because they fear they will lose customers in the future if their products are not up to snuff. Out of about $5 billion in quarterly revenue, Cisco Systems last quarter spent $970 million on research and development. Extreme Networks, which raked in $112 million in revenue last quarter, spent $16.5 million on research and development.

Coming soon
Apple Computer confirmed the launch of its first retail store, in what is expected to become a nationwide chain of outlets. The first store will open May 19 in McLean, Va., according to an invitation to a press event scheduled ahead of the launch. Apple has been laying the groundwork for more than a year on a strategy for its own retail presence. In late 1999, Apple hired Allen Moyer, a former Sony executive involved in retail projects such as the futuristic Metreon retail-entertainment complex in San Francisco.

As wireless networking grows in popularity, IBM and Compaq Computer are joining the race to integrate the technology into corporate notebooks. Sources close to Compaq say the company plans as soon as next week to introduce laptops with MultiPort, an add-on technology for wireless networking. Meanwhile, IBM is moving ahead with plans for its first corporate laptop with built-in wireless networking. A source close to IBM says the ThinkPad T23, which could be up to a couple of months from launch, will add integrated wireless networking to the company's line of thin-and-light portables.

IBM Microelectronics is counting on its research powerhouse to push it ahead of Motorola in the lucrative market for networking chips with PowerPC processors that will reach the 2GHz mark. IBM's PowerPC development team plans to use several homegrown technologies to help boost performance of future PowerPC chips, which it will announce later this year. The chips will be capable of hitting 1GHz late this year, with IBM eyeing the 2GHz mark for late 2002. Faster chips likely will mean faster Apple computers, which are based on the PowerPC.

Also of note
A jury ruled that Rambus committed fraud against Infineon by failing to properly disclose patent information when required by an industry standards body...Web hosting company Exodus Communications said an explosion partially cut its power supply Monday, leading to temporary service interruptions for some customers, including Yahoo...Low-price PC maker Emachines said it has asked Credit Suisse First Boston to help it evaluate "strategic alternatives," which could include putting itself up for sale...Amazon.com has scaled back its wireless commerce initiative, reassigning developers to other projects.

View all this week's News.com headlines.