PC makers push XP out the starting gate

The tech industry will soon find out whether Windows XP will encourage wary consumers to spend their money on new systems for home and office.

On Monday, PC makers including Compaq Computer, Dell Computer and Gateway unveiled a host of new systems preloaded with the latest Microsoft operating system. Prices start at about $750 for desktop models without monitors and $999 for laptops.

However, economic uncertainties may mean that the computer-buying public--millions of PC owners whose machines have processors at 500MHz or slower--may initially do more window shopping than buying.

Regardless, with Monday as the first day PC makers can offer Windows XP on new systems, manufacturers are attempting to motivate shoppers to upgrade their older PCs.

Gateway, for example, greets visitors to its Web site with a pop-up window that directs them to an XP page. The page displays two desktop and two notebook lines. Among the listings, Gateway's 500S desktop offers a 1.5GHz Pentium 4 chip, 128MB of RAM, a 20GB hard drive, a CD-RW drive and a 17-inch monitor for $999.

Compaq Computer took a similar route. The company on Monday launched Windows XP across four lines, including its desktop Presario 5000 and three new models. Its debuting PCs include the Presario 8000 desktop, starting at $1,199, and the Presario 700 and 2700 notebook lines, starting at $999 each.

The new Presario 8000, designed as a high-end desktop for gamers and other computer buffs, includes a choice of AMD Athlon or Intel Pentium 4 processors, high-end graphics and a range of DVD drives.

PC makers Dell and Hewlett-Packard favored a more subdued approach.

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Dell will begin shipping Windows XP preinstalled on its Dimension and Inspiron desktop and notebook lines this week. It is offering a deal on a Dimension 4300 desktop with a 1.6GHz Pentium 4 chip, 256MB of RAM, a 40GB hard drive, a 17-inch monitor and a DVD drive for $1,169 via its Windows XP Web site.

HP is offering the new operating system on a number of desktops and notebooks. Its Pavilion 7955, for example, has a 1.5GHz Pentium 4 processor, 256MB of RAM, a 40GB hard drive and a combination CD-RW-DVD drive for $949 without a monitor. Its Pavilion 7935 offers a 1.3GHz AMD Athlon chip, 128MB of RAM and a CD-RW for $749 without a monitor.

Officially, Windows XP won't debut until Oct. 25, but Microsoft is permitting PC makers to sell computers with the new OS on Monday. Initially, Microsoft instructed PC makers to soft-pedal the prelaunch. But subtlety appears to be falling by the wayside. And roughly 30 days after the Oct. 25 release, Windows XP will become the near-exclusive OS for consumer computers, according to sources in the PC industry.

Whether Windows XP will prompt consumers to buy new PCs has been one of the major debates in the industry this year.

Optimists have pointed out that Windows XP contains a number of new features, including a splashy interface called Luna. In addition, Windows XP takes a lot of the pain out of burning CDs, editing video and managing other multimedia applications.

"If XP--after Microsoft spends a half a billion dollars delivering (its) message--isn't a success, I will be amazed," said Nathan Brookwood, an analyst at Insight 64, adding that he is impressed with a prerelease copy of the OS. "XP is the thing that will create the desire in consumers to get a new computer."

XP's initial success will likely hinge on the success of advertising by Microsoft and PC makers, analysts say.

"I think that this is going to generate traffic and therefore generate demand," said Stephen Baker, analyst with NPD Intelect. "The whole thing is going to be, can we get people up and out and into the stores?"

He added: "I'm still not willing to write off Christmas yet."

However, others believe that the dour economy, compounded by the recent terrorist attacks in the United States, will put the brakes on discretionary spending. And the new features on Windows XP aren't all that exciting either, according to some analysts.

"People aren't going to go out and buy new PCs for the features in XP. It's just not going to happen," Technology Business Research analyst Brooks Gray said. "There is a large amount of people feeling the impact of the economy right now, myself being one of them. Then you have the saturation of the PC market. The drivers aren't there for people to go out and necessarily purchase a new PC."

History, to some degree, favors the pessimists. Although Windows 95 substantially juiced PC sales, the last three Microsoft operating systems haven't been a factor in jump-starting sales, according to analysts. Consumers and businesses bought Windows 98, Windows Me and Windows 2000, but mostly because they came on PCs they were buying anyway.

Still, an upgrade cycle does lie around the corner, according to various PC executives and analysts. Corporations typically upgrade PCs every three years. The last buying binge occurred between late 1998 and early 1999.

"You've got an installed base that is (at 400MHz), when the state of the art is a gigahertz and above," Paul Otellini, general manager of the Intel Architecture Group, said in August. ?That difference creates such a vacuum that demand is created."

All of the predictions about a 2002 upgrade cycle, however, took place before the attacks on the World Trade Center and the Pentagon.