The company on Saturday will issue Windows XP Release Candidate 2--the expected final testing version--Microsoft Group Vice President Jim Allchin said Friday during a media conference call.
But as Microsoft puts the finishing touches on the new version of the Windows operating system, the company faces a growing controversy over the new software. Rather than generating the excitement of the Windows 95 launch, where hordes of people lined up outside computer stores for early copies, Windows XP is the focus of competitive and government forces seeking to delay the new operating system's release.
At the same time, analysts and some computer makers still aren't convinced that Windows XP will do much to revive anemic PC sales in the United States, which in the second quarter plummeted 7.1 percent based on averaged estimates from Dataquest and IDC.
Still, Allchin appeared upbeat about Windows XP and meeting the Oct. 25 shipping date, comparing the current stage of the software to the surge of energy that runners get during the last leg of a race.
"We've got the finish line in sight," he said. "I've never been more excited about a product." Allchin noted that as he arrived at work Friday, the Windows XP countdown clock read 90 days to launch.
The timing of Release Candidate 2 is in some ways unusual. People who signed up for the Windows XP Preview Program are just now receiving their CDs with the first release candidate. Those people paid about $20 for the CD, but they do have the option of downloading the newer testing version.
Microsoft also is delivering its final test version very close to the launch of the "release to manufacturing" (RTM) software code, from which the company will make boxed Windows XP versions and PC makers will install the operating system on new computers. Several PC makers said Microsoft has set RTM code delivery for around Aug. 20.
Genie out of the bottle
Hitting that date would be important for getting Windows XP on PCs in advance of the Oct. 25 launch. Such action could make it more difficult for trustbusters or other parties to obtain an injunction against Windows XP.
"The sooner Microsoft can get Windows XP out the door, the more likely they are able to protect it in some sense," said Andy Gavil, an antitrust professor with Howard University School of Law. "Once the genie is out of the bottle, it's pretty tough to get an injunction to put it back in."
On Tuesday, Sen. Charles Schumer, a Democrat from New York, called on the Justice Department and 18 states to consider taking action that would delay Windows XP's release. At Schumer's request, Senate Judiciary Committee Chairman Sen. Patrick Leahy, a Vermont Democrat, plans to hold hearings on fair competition, which in part will focus on Microsoft and Windows XP.
Also on Tuesday, software maker InterTrust amended an existing lawsuit asking a California court to stop Windows XP from shipping. The company alleges that Microsoft's controversial product-activation technology violates four InterTrust patents.
On Thursday, more than 10 privacy organizations filed a complaint with the Federal Trade Commission, requesting the agency delay Windows XP's scheduled shipment. The groups allege that Windows XP's poor implementation of security and privacy provisions constitutes unfair and deceptive trade practices.
Windows XP's cool reception in part comes from Microsoft's dominant position in Intel-based operating systems and from a federal appeals court upholding eight separate antitrust charges against the company. Now, branded as a monopoly product, Windows is an easy target for competitors, politicians and advocacy groups, say legal experts.
"One reason Windows XP gets a lot of attention is Microsoft's a monopolist," Gavil said. "What constituency wouldn't be affected by Windows? I don't know of another example where all of us use the product of one company. It's so ubiquitous. From a political viewpoint, everyone's got constituents watching it and concerned about it."
Allchin said Microsoft had no contingency plan against a possibly forced delay, although he emphasized, "We're not ignoring it."
He added: "The product that I see written about is not the product that I am building...The industry needs this product."
Sales savior or dud?
But analysts and PC makers are losing confidence that Windows XP's release can pull PC sales out of their doldrums.
Though PC makers are publicly planning for a big fourth quarter, several privately admit they are hopeful but not optimistic about a year-end sales surge. In fact, researcher IDC forecasts a modest 5 percent increase in PC shipments moving to the fourth quarter from the third and a 0.3 percent decline year over year.
"Microsoft has talked Windows XP up as a big lift, but we don't see that," said IDC analyst Roger Kay. "In the past, software was a lift to hardware sales, but certainly not now in a saturated PC market and with these (weak) economic conditions."
During its Thursday meeting with financial analysts, Microsoft reiterated concerns that worldwide PC growth would be only 5 percent to 6 percent during its 2002 fiscal year, which started July 1.
But Allchin remained optimistic. "I think XP will help the industry," he said, noting that there are "180 million-plus" PCs capable of upgrading to Windows XP.
Promotion will be key to generating sales, with Microsoft, Intel, PC makers and retailers investing as much as $1 billion in the cause.
"We're going to have a global TV and print campaign...where we're going to be spending over $200 million over the first four months"--double the level for Windows 95, Allchin said. "We expect to reach 85 percent of the target audience five times."
Allchin estimated that more than 500,000 people have a beta version of Windows XP, with 250,000 signing up for the Preview Program.
Those testers will see some changes in Release Candidate 2. Microsoft removed Smart Tags, which are created using XML (Extensible Markup Language). The technology, ditched from Windows XP but kept in Office XP, has been criticized for potentially strengthening Microsoft's ability to tie its newest applications and operating systems to its own Web sites or others that it favors, including those that charge fees.
Release Candidate 2 also will ship with a clean desktop. Allchin said usability studies had determined too many icons confused consumers. But in a loosening of Windows licensing agreements earlier this month, Microsoft allowed PC makers to put whatever icons they wanted on the desktop. The company also gave computer manufacturers more freedom in configuring the Windows XP Start menu, something AOL Time Warner's America Online division is trying to take advantage of.
AOL has been courting PC makers for a place on the Start menu, but Microsoft accuses its online services rival of trying to shut out rivals through exclusive placement.
"Hiding features from consumers we don't think is a good thing," Allchin charged. "I don't think it's a good thing for consumers, and I don't think it's a good thing for the industry."
Allchin would not reveal what Windows XP would cost consumers at retail.
Online retailer Amazon.com earlier this month offered the first look at Windows XP pricing. The company started taking preorders for the new operating system, but soon afterward it pulled the product from its store.
Although Amazon executives said the company made its decision because pricing had not been finalized, sources close to Microsoft revealed that the software maker had demanded the action.
Amazon's preorder price for the consumer Windows XP version upgrade was $100, and $200 for the full version. Amazon had listed the commercial upgrade for $200 and the full commercial version for $300. All prices are increases of $10 to $20 over the most current consumer or commercial Windows versions.
Windows XP will be available in two versions: Home and Professional. The basic interface and broad set of features are identical, with most changes affecting networking, security and management. Windows XP Professional, for example, offers features better suited to connecting to corporate networks than does the Home version. XP Professional also supports multiprocessing, whereas the consumer version supports only one computer processor.