Stores pile on freebies with Windows XP

Major retailers are offering goodies such as digital cameras and Palm handhelds to those who buy Microsoft's new operating system.

Consumers used to have to buy a computer to get a free Palm device or a digital camera, but the freebie bar has just been lowered with the release of Windows XP.

Staples, Circuit City, Office Max and other retailers are offering a cavalcade of freebies for a limited time to customers who buy the home or business edition of Windows XP. In some instances, the value of the goodies outstrips the cost of the software.

These programs, part of Microsoft's multimillion-dollar promotional campaign, highlights the company's urgent need for the new operating system to succeed at retail.

Staples, for instance, will give customers buying Windows XP Home Edition 128MB of memory, three free months of MSN Internet service, a host of software titles and one of the following items: a Palm m100 handheld computer, a CD-RW drive, a digital camera or a cable/DSL router. The upgrade version of Windows XP Home Edition sells for $99; the Palm m100 itself sells for $99.

Circuit City is giving away a joystick, a digital camera, 128MB of memory and speakers with Windows XP Home Edition.

All of the programs function like rebates: customers have to buy the freebies and then send in a reimbursement form.

In the past year, computer makers have increasingly tried to entice customers with cash rebates and free hardware to land a sale amid a cold economic climate. At various times in the year, Dell has given away MP3 players, free DVD-ROM upgrades, Palm handhelds and even instant cash rebates with its PCs.

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Apple has also periodically joined the fray. The company, for instance, is giving away a digital camera with certain iMacs.

Deals like this can have the same effect as a price cut, retail analysts point out--without the pain associated with a price cut.

PCs, though, typically cost $599 or more. The consumer version of Windows XP sells for $99 for the upgrade version (for those upgrading from a previous version of Windows) or $199 for the full version. Windows XP Professional sells for $199 for the upgrade version and $299 for the full version.

Still, technology sales are down across the board. Overall, Microsoft, Intel, retailers, and PC makers will spend about $1 billion to promote Windows XP.

The success of the operating system, especially over the coming year, will largely depend on the consumer market, according to, among others, Microsoft CFO John Connors. Most business customers will continue to buy Windows 2000.

see CNET Software: Windows XP Guide One difficulty Microsoft may face in the coming months is a change in buying habits of the public regarding operating systems. In the past, many consumers bought a box version of the software and installed it themselves. Increasingly, though, many are buying the software with a new PC--and PC sales are down.

"The absolute units (of boxed copies of Windows XP) will be large, but the percentage will be lower than it was with Windows 95," Connors said.'s Ian Fried contributed to this report.