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Win 98 sales to lag behind Win 95

Initial sales of the upgraded operating system will be significantly lower than sales of Windows 95, especially among large companies.

Microsoft and its partners have predicted severe economic consequences should the launch of Windows 98 be delayed by the Justice Department, but a new study says that initial sales of the upgraded operating system will be significantly lower than sales of its predecessor, Windows 95, especially among large companies.

Regardless of threats to Windows 98's scheduled June 25 release date, a new report from International Data Corporation (IDC) predicts that sales of Windows 98 will fall by 15 percent compared to early sales of Windows 95. Microsoft will ship 12.8 million copies of Windows 98 in 1998, compared to 19.5 million shipments of Windows 95 in 1995, according to the market research firm.

The new version of the nearly ubiquitous operating system (OS) features faster start up/shut down time and support for multimedia and gaming features, as well as support for USB (universal serial bus), TV tuner cards, and DVD (digital versatile disc) drives.

Preparations for its release have been clouded by an ongoing antitrust investigation by the DOJ and some 20 states. Yesterday, Microsoft dodged one bullet in the federal investigation when an appeals court ruled that Windows 98 is not covered by a court order requiring Microsoft to ship Windows 95 and its Internet Explorer Web browser separately.

But Microsoft has not spent nearly as much money on the marketing and promotion of Windows 98 as it did on Windows 95.

On the demand side, large organizations will be strapped for technology resources over the next 18 months as they grapple with Year 2000 issues and Internet spending, according to Bill Peterson, an analyst at IDC. Upgrading to Windows 98 will probably not be a priority.

Further, Microsoft has been pushing Windows NT as the corporate platform of the future, rather than Windows 98.

"Anytime you want to talk business, Microsoft wants to talk NT," said Peterson. "Plus, any time a new OS comes out, a large organization will historically wait to install it."

Microsoft shrugged off the finding. "As IDC says in their report, Windows 98 is designed for the consumer," said Kim Akers, group product manager for Windows 98. "We do recommend that corporations move to NT," even if it means skipping installation of Windows 98, she added.

Corporate sales are expected to rise after three years, after companies deal with the Year 2000 bug. Windows 98 is expected to ship 66 million copies in 2000, compared to the 53 million copies Windows 95 shipped in its third year.

Peterson painted a rosier picture in the consumer market. Because there are so many more computers on the market today than when Windows 95 was released, a projected 6.9 million consumer upgrades to Windows 98 will be one bright spot for Microsoft. And because PC vendors will ship new systems with the upgrade installed, Windows 98 will supplant Windows 95 over time.

Consumers will likely be lured by faster on/off times and gaming capabilities; support for hardware like TV tuners and DVD drives will be less of a factor, Peterson says, because most users don't yet have these components. Consumer sales will also be boosted by PC vendor and retailer promotions and rebates.