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Microsoft slashes price on Windows Me

In what may be an unprecedented maneuver to push people to upgrade Windows 98, the software giant will offer its Windows Me, or Millennium Edition, operating system at a $30 discount.

"Sale" is not usually a store term associated with Windows.

But in what

Gartner analyst Michael Silver says Microsoft wants to make Windows Me as affordable as possible for as many people as possible because the product relies more on the consumer market.

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may be an unprecedented maneuver to push consumers to upgrade from Windows 98, Microsoft will offer Windows Me, or Millennium Edition, at a $30 discount, the company announced today.

Street prices for the last three versions of Windows for consumers hung at $89, but the company will offer Windows Me for $59. The new operating system goes on sale Sept. 14.

Microsoft may have good reason for the fire sale, say analysts, who note that few consumers upgraded from Windows 95 to Windows 98 or from Windows 98 to Windows 98 Second Edition without special incentives. While Microsoft has successfully wooed PC makers to quickly move to the newest version of Windows, it has had a hard time getting customers to buy boxes off the shelves, analysts say.

Microsoft's Windows Me discount strategy could help spur retail sales, but analysts aren't convinced it will help that much. "Microsoft makes too many new features available for free download on the Web, and that gives consumers less incentive to buy in stores," said PC Data analyst Mark Bates.

Also looming over the Redmond, Wash.-based company are allegations of overcharging related to its antitrust case and more than 130 private lawsuits. Microsoft aims to boost sales as it prepares for a period of slower growth.

Gartner analyst Kevin Knox said the reasons for upgrading Windows 98 to Windows Millennium are more compelling than those for moving to Window 98 from Windows 95. "But I still think there's not going to be a mass migration to Me," he said. "Many people are going to evaluate whether they need those new features, and many of them are going to say 'no.'"

Most of Windows Me's best features, like those of its predecessors, are geared more toward new systems than toward enhancing existing ones, Knox said. "I don't think Microsoft is making it compelling for people to do new upgrades, but I do think they are making it compelling for new systems coming in the door to enable new hardware functionality."

PC Data reports to date that Microsoft has sold 4 million copies of Windows 98 and Windows 98 SE at retail, generating $350 million in revenue.

Still, the sale strategy can't hurt Microsoft, as accusations of price-fixing loom from its antitrust case with the government. A federal judge in June ordered that Microsoft be split into separate operating system and software applications companies for violating U.S. antitrust law. To help prove that Microsoft wielded monopoly power, the government introduced economic evidence suggesting that Microsoft overcharged consumers by as much as $40 per copy of Windows.

Tomorrow, Microsoft will file a motion in a Baltimore court asking a panel of federal judges to dismiss more than 60 class-action suits also alleging that Microsoft overcharged for Windows.

Windows Me should not be confused with Windows 2000, Microsoft's upgrade for corporate customers using Windows NT, 95 or 98. Windows 2000's strength over its consumer counterparts is greater stability, but the operating system's security features prevent it from running most games.