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Microsoft readies XP for late October

The software giant provides dates for delivering the Windows operating-system upgrade to computer manufacturers eager to ignite PC sales for the end-of-year holidays.

Microsoft's much-anticipated Windows XP operating system, seen as a catalyst for igniting PC sales, will launch Oct. 25, the company said Wednesday.

A delivery date for the software upgrade to Windows 95, 98, Me and 2000 has been a moving target in recent weeks, with Microsoft shifting the release of final--or gold--code to PC manufacturers three times. Gold masters are used to make copies for sale at retail or on new PCs.

As recently as Friday, Microsoft told PC makers that Windows XP would go on sale Oct. 29, according to sources close to the companies. A week earlier, the company warned that if it missed a July 25 target for delivering gold code, it could push Windows XP's launch to the first quarter.

Instead, Microsoft delayed gold code delivery until Aug. 25 and revealed the late-October availability date.

"We were expecting a six-month delay, and we're so ecstatic about the one-month delay, we hardly heard the rest of the call," said one source familiar with Friday's briefing.

That reaction underscores the importance of Windows XP to computer manufacturers, which are looking for any means possible to ignite PC sales for the end-of-year holidays.

Still, the news is not all good for computer makers. As recently as a month ago, Microsoft told PC manufacturers that they would receive gold code in June, allowing them to begin selling Windows XP systems during the latter portion of the back-to-school selling season--the second-busiest sales period of the year.

Gartner analyst Mike Silver says that despite Microsoft's hype about Windows XP, most enterprises are not in for a significantly different experience.

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"There is no question that it's tough missing back-to-school, particularly given the grim sales climate," said IDC analyst Roger Kay.

U.S. PC sales declined 9.5 percent in the first quarter of this year, according to IDC.

In a Wednesday morning conference call with the media, Microsoft Group Vice President Jim Allchin defended the company's missing the back-to-school buying season.

"I don't mess around with quality," he said. "The quality was the No. 1 thing that we focused on here, and we feel good that we can lock that date in. It would have been nice to make the back-to-school time frame for preloading, but quality came first. But you will see for the holiday season massive shipments."

On the other hand, Microsoft will be giving retailers a big boost that could drive lots of holiday traffic. The company on Wednesday said that Windows XP will be the company's biggest product launch ever--doubling the amount Microsoft spent on promoting Windows 95 during the first four months of availability.

"Microsoft can get out the marketing dollars like no one else," said NPD Intelect analyst Stephen Baker. "The promotions and co-marketing dollars could really help drive traffic into the stores that last couple months of the year."

Allchin said the company will spend hundreds of millions of dollars promoting Windows XP, and he predicted a big PC sales boost for the fourth quarter. "We're going to blow out the holiday season. It's going to be incredibly exciting," he said. "The holiday season is going to be great for the PC industry."

About the resources dedicated to the Windows XP effort, Allchin said, "Compared to Windows 95, we dwarf that."

Microsoft brought in funnyman Jay Leno and secured the rights to the Rolling Stones' "Start Me Up" for the Windows 95 launch event. Allchin joked about not having decided on whether to go back to the Stones for a Windows XP encore.

"We haven't figured out the launch, the specific event location, nor what we are going to do for excitement...We have some pretty crazy ideas."

Windows XP will be available in two editions: Home and Professional. The Home version, for consumers, is the upgrade from Windows 98 and Me. The Professional version is the upgrade from Windows NT and 2000. Both versions are built on Windows NT/2000 code, which offers better memory protection than earlier consumer versions of Windows, making it more crash-resistant.

Allchin would not comment on pricing for either version of Windows XP.

Quick consumer sales, slower business uptake
The two versions are likely to see different rates of adoption, according to analysts and Microsoft customers.

Baker predicted brisk demand for Windows XP Home edition. "I would say unequivocally this would be a major driver of sales in the fourth quarter," he said. "It will impact everybody's sales planning."

Gartner analyst Michael Silver offered a similar assessment.

"PC vendors love to have something new and exciting for Christmas, and that's why they were pressuring Microsoft to get this out," Silver said. "From the looks of it, if Microsoft had a little extra time, they would take advantage of it. But they were under tremendous pressure from PC vendors not to wait."

Businesses will likely take longer to move to the upgrade, Baker said. "Businesses are by definition more conservative about moving to new operating systems. Windows 2000 was not a major driver of business sales when it came out. The only part of the market that saw some quick uptake for Windows 2000 was the notebook market because there was a demonstrable benefit over NT."

As with the release of Windows 2000, many companies will likely wait until Microsoft issues the first Windows XP service pack--a collection of bug fixes--before making a switch, Baker predicted.

One company likely to take that route is Koch Industries, a diversified oil and gas investment and trading company that employs 11,000.

"We would wait for the first service release to deploy Windows XP, so that would be early 2002 before we'd be willing to deploy," said Michael Korgie, Koch's director of infrastructure planning. The company is about six months along in a three-year migration to Windows 2000, he said. "We are not accelerating our normal PC refresh cycle to upgrade the OS."

The company already has converted about 10 percent of its desktops to Windows 2000, with 70 percent running Windows NT and 20 percent running Windows 95 or 98.

Tim Kirchner, Web site administrator for Technology Business Research, had different reservations about Windows XP.

"As a company, I don't see us moving to it anytime soon, because it doesn't offer any functionality we would depend on," he said. "Most of the stuff that is different about it (is in the) interface, and skin-deep. Until we have a specific reason to mandate the upgrade, we wouldn't consider it."

Technology Business Research runs Windows NT 4 on its servers and Windows 2000 Professional on some newer workstations.

Kirchner also expressed strong displeasure with the Windows XP interface, code-named Luna, describing it as "confusing. My initial reaction was that it is the cross between a game show and a cartoon. They've done too much with bright colors and flashing lights."

Still, many businesses have halted Windows 2000 upgrades, opting to wait for Windows XP instead, Silver said. "This obviously gives Microsoft the chance of earlier sales than later. Having the product out this year means people can start doing their testing and porting their machines to XP early next year."

Windows XP is in the second beta, or testing, version. Allchin said there will be no beta 3, as the company goes directly to the first release candidate (RC). "We will be doing at least one RC," he said. "In fact, we may be doing some others."

Microsoft will offer a preview program for Windows XP that carries a $9.95 registration fee. Those signing up for the program can download the first Windows XP release candidate in June or receive a CD for an additional $10. A second release candidate, available in July, will be downloadable only. A release candidate is the next phase beyond beta testing before the code is "locked" for release to manufacturing.