Microsoft to demonstrate new operating system

As previously reported, Microsoft will debut the operating system this weekend at Microsoft Extreme, the company's venue for sneak previews of products. Also being shown is Pocket PC, the company's new version of Windows CE for handheld PCs, and Front Page 2000 Web authoring software.

For the first time, Microsoft will show to the public the third and last version of Windows 98. Changes under the hood focus on four main areas: PC health, digital media, home networking and improved online experience.

The OS is designed to simplify previously complicated tasks such as installing peripherals and solving system crashes. The company has also taken several steps to address the gap between the operating system and new consumer technologies that have emerged since the last release, especially in digital media.

"What they're trying to do is strongly differentiate this product from Windows 2000. Microsoft clearly does not want business users to use this product," said Gartner Group analyst Michael Gartenberg.

While consumers should see improvements, small- or home-business users may not benefit from the new OS because Microsoft has removed support for some corporate networking technologies available in Windows 95 and Windows 98.

"If it has the performance users need, the stability users need, or the compatibility users need, there's nothing wrong with using it," Gartenberg said. "But it clearly raises a number of issues for the small business user who doesn't want to go to Windows 2000. Microsoft should let the market bear out what it wants."

Windows Me is set to be released in the second half of this year, both as an upgrade and loaded on new computers. Microsoft next week will ship the third beta, or test version, of the OS to beta users.

Like Windows 98 before it, Windows Me is closely integrated with the Internet and includes several direct links to other Microsoft properties, including MSN and Microsoft online games. The direct integration between the desktop operating system and Internet Explorer in Windows 98 helped spark the antitrust investigation that resulted this week in a ruling against Microsoft.

Microsoft says the development process was not affected by its legal woes.

"Nothing was influenced by the legal stuff--I let the legal people do their stuff, and I do mine," said Art Pettigrue, a product manager in the consumer Windows division at Microsoft. "We were really heads-down on delivering this."

Windows Me development has seen many twists and turns within Microsoft. Originally, Windows 98 was to be the last DOS-based operating system for home users to come from the Redmond, Wash.-based software maker. But a combination of product delays and market shifts led the company to push back the planned transition to its Windows NT code base. (Windows NT is the precursor to Windows 2000.) Instead, it released Windows 98 Second Edition in 1999 and announced that Windows Me would be the last DOS-based operating system from the company.

"We're squarely focused on the home user," Pettigrue said. "This is an incremental step. We're not saying Windows Me is the end-all for home computing at Microsoft."

Microsoft clearly dominates the consumer operating system market, unlike the business world where Linux has made inroads. Although Apple's Macintosh operating system runs the popular iMac, and Internet appliances completely free of Microsoft software are emerging from companies such as Gateway and AOL, the company still retains the lion's share of the home market.

"The PC is still very relevant," Pettigrue said, explaining that Windows Me-based computers won't necessarily compete with scaled-down Internet devices, such as the MSN Web Companion. "The devices are cool, but we're targeted toward the everyday user."

Just as when Windows 98 and Windows 98, Second Edition were released, most users will not see much benefit from the hassle of upgrading, analysts say.

"Operating systems don't wear out and don't go out of style; they get obsoleted by technology. Windows 95 and Windows 98 are still good for most people to use," said Gartenberg. "If you don't have a really compelling reason to go to Windows Me, then it's not going to be worth the time or effort."

Further, upgrading over an existing operating system may be unnecessarily risky, Gartenberg said. Many Windows 95 users reported problems upgrading to Windows 98, including lost data and non-functional printers and peripherals.

"We don't recommend upgrading one OS over the other because in many cases it simply will not work," he said. "You're taking a fairly big risk, unless you're the kind of person who installs OS's as a form of social entertainment."

Windows Me includes the latest version of the Windows Media Player, which allows people to download digital music files and stream music and video directly from the Internet; save music from CDs as files on a desktop; and organize media files directly in the operating system.

Other new features include:

• System Restore, which restores deleted critical system files
• Auto Update, which automatically downloads updates from the Windows Update site
• Home Networking Wizard, designed to simplify adding computers or peripherals to a home network
• Windows Image Acquisition, designed to simplify downloading and saving images from digital cameras
• Windows Movie Maker digital video editing software