Windows Me: Windows 98 all over again?

The new operating system will easily become a dominant fixture in home computing, but analysts say consumers shouldn't expect any eye-popping changes.

3 min read
Windows Me officially launches today, bringing with it a distinct sense of déjà vu.

The new operating system, which went on sale quietly last month, will easily become a dominant fixture in home computing. But although the new OS will tout improved video playback and other features, analysts say consumers shouldn't expect any eye-popping changes.

Why? The new OS is largely an extension of Windows 98, which Microsoft chairman Bill Gates initially promised would be the last operating system based on DOS, the OS that forms the bedrock of the Redmond, Wash., empire.

Consumers who want to see dramatic changes in an OS will have to wait until next year, when Whistler is scheduled to arrive. Whistler, which will target both the home and business computing markets, is the next version of Windows 2000, Microsoft's OS for offices.

Windows Me "looks amazingly like Windows 98, which looked amazingly like Windows 95," said Dan Kusnetzky, a software analyst with International Data Corp.

Windows Me, or Millennium Edition, was originally supposed to be the first consumer operating system based on the company's Windows NT code, which is considered to be more stable and reliable than Windows 98.

Under the original plan, Windows 98 would have been phased out. Instead, the company released Windows 98 Second Edition last year and now Windows Me. Microsoft opted to extend Windows 98 this time around rather than move to NT immediately because of product delays in getting Windows 2000 out the door and because of radical changes in the home PC market, where Internet appliances and wireless devices have been gaining a foothold.

Still, the new OS does take advantage of some of the latest technological developments. Windows Me includes a digital video editing application, similar to one Apple Computer has been shipping with its higher-end iMac. It also includes a feature that will restore system files if they have been accidentally erased.

The operating system software, which acts as a buffer between the PC hardware and other applications, also provides software that simplifies the process of networking devices through the PC, as well as improved digital camera and imaging support.

"The PC experience is different than it was even a few years ago," said Greg Sullivan, product manager for Windows Me.

"This is the first time we've solely been able to focus on the home user," he added, conceding that the improvements in the OS are "incremental."

But analysts say the new operating system may be more significant for the glimpse it provides into Microsoft's future, which will be characterized by constant upgrades.

"My sense is that this is driven by Microsoft's need to have upgrade revenue coming in on a regular basis," Kusnetzky said. "Their business model requires that people upgrade."

This planned obsolescence of Microsoft products, which is designed to drive incremental revenue through upgrades, will be kicked up a notch when the company starts unveiling its .Net products and hosted applications, paid for on a subscription basis.

By renting out its products, the thinking goes, Microsoft would be less tied to the fluctuations of the PC market and new PC sales, which currently drive the bulk of the company's operating system and application sales. Incremental upgrades require less marketing and development dollars as well, analysts say.

"Going forward, Microsoft is now on board with the concept of online upgrades to their operating systems and applications," said Dwight Davis, who tracks Microsoft operating systems for Summit Strategies. "This is potentially more lucrative, although there is still some uncertainty about that."

Denying that Windows Me is a direct precursor to hosted applications or subscription-based business models, Sullivan concedes that elements of Windows Me will foreshadow the future online delivery of applications and other new features. "The Windows experience is more dynamic than it was," he said.