HP to ship PCs with Windows XP

The company plans to begin shipping the systems next week. In a move following Gateway, HP also will take preorders on custom-configured systems starting Sept. 21, with anticipated delivery as early as next Monday. The company also expects to begin selling new Windows XP systems in retail stores on the same day.

Microsoft has cleared PC makers to begin selling new Windows XP desktops and portables starting Sept. 24, about one month before the new operating system's Oct. 25 official launch.

As HP and its competitors prepare for the first salvo of Windows XP computers, analysts are increasingly concerned the new operating system will have negligible to no impact on holiday PC sales.

If consumer confidence plummets, as some analysts predict following last week's devastating terrorist attacks in New York and Washington, the Grinch, not Santa, may greet many retailers this holiday season, analysts warn.

"People aren't going to go out and buy new PCs for the features in XP. It's just not going to happen," said Technology Business Research analyst Brooks Gray. "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."

Even before last week's national tragedy, analysts were taking a grim view of holiday PC sales, even as Microsoft, Intel, PC makers and retailers prepared to launch a $1 billion Windows XP marketing blitz.

"I just don't see Windows XP doing much for holiday sales," said ARS Toni Duboise. "It's good that it's coming out on new PCs before the fourth quarter, but beyond that I don't see much benefit."

Earlier this month, market researcher IDC cut its 2001 PC shipment forecast to a decline of 1.6 percent from 5.8 percent growth. In the United States, IDC predicted PC sales would plummet about 13 percent from a year earlier.

But some new PC buyers held out for Windows XP and are ready to place their orders.

"I personally waited to purchase a new computer because of Windows XP. I was actually ready to purchase a new computer about six months ago," said Scott Guttenberg, a tax account from East Meadow, N.Y.

Guttenberg, who is considering buying from HP rival Dell Computer, didn't want to go through the hassle of a Windows XP upgrade. "I have heard to many problems exist when you change your operating system," he explained. "I thought this was good reason to wait for Windows XP rather than buying an obsolete operating system such as Windows Me."

Pricing Pavilions
Possibly sensitive to the potentially hostile sales climate, HP will pony up some fully loaded Windows XP PCs at surprisingly low prices.

The entry-level Pavilion 7935 consumer PC, with 1.3GHz AMD Athlon processor, 128MB of SDRAM, 40GB hard drive, 8X CD-RW drive and network connector starts at $749. For $200 more, the Pavilion 7955 packs a 1.5GHz Pentium 4 processor, 256MB of SDRAM, 40GB hard drive, 16X DVD drive, 12X CD-RW drive, 32MB nVidia TNT2 M64 graphics card and front-access USB and IEEE 1394 ports. The company also is offering a $150 mail-in rebate on certain monitors, which are sold separately.

These new Pavilions are priced considerably less than current 7940 and 7960 models, both which pack slower processors. The 7940 sells for around $850 from major retailers, such as Circuit City and CompUSA, while the 7960 goes for $1,050.

On the notebook front, HP initially will offer two Windows XP models: the Pavilion N5425 and N5415. The first model sells for $1,600, with 900MHz AMD Athlon processor, 256MB of SDRAM, 20GB hard drive, combo DVD/CD-RW drive and Ethernet card. The N5415, with 900MHz AMD Duron processor, 256MB of SDRAM, 10GB hard drive and 8X DVD drive for $1,299. HP will offer a $100 mail-in rebate with both models.

HP will bring the new systems to market, at least at retail, from a position of strength. Year-to-date, the company has about 42 percent retail store market share compared to 34 percent for Compaq Computer, according to NPD Intelect.

But HP is in the process of buying Compaq, which could help the company solidify its lead over other companies selling through stores, such as Apple Computer, Sony and Toshiba.

HP may still face a stiff challenge from Dell Computer and Gateway, but for now is holding its own on price. Gateway's 500S starts at $999--$50 more than the Pavilion 7955--but comes with a 17-inch monitor. The downside: Half the memory, smaller hard drive and no DVD drive of the comparably priced Pavilion.

Dell's Dimension 4300 is nearly identically configured to the Pavilion 7955 but with a 17-inch monitor and no CD-RW drive for heftier $1,300. Even adding the cost of a monitor to the price of the Pavilion, the rebate brings it below Dell model.