Can a Vista coupon save holiday PC sales?

Microsoft plans to offer some kind of Vista-related promotion, but it's unclear whether promises of upgrades will fend off sluggish sales.

Ina Fried Former Staff writer, CNET News
During her years at CNET News, Ina Fried changed beats several times, changed genders once, and covered both of the Pirates of Silicon Valley.
Ina Fried
3 min read
Windows Vista isn't ready to be loaded on new PCs yet. But that doesn't mean computer makers won't be trying to sell the new operating system this holiday season.

Already, PC manufacturers and retailers are touting some models as "Vista-capable." And as the computer industry gears up for the all-important end-of-year sales period, there is likely to be even more focus on the not-yet-finished update to Windows.

Microsoft is planning some sort of promotion to allow those who buy PCs this year to move easily and affordably to Vista when it ships next year. Windows unit head Kevin Johnson told CNET News.com in May that the company was looking into offering some sort of technology guarantee for holiday PC buyers.

"There's likely to be something, and they're working on specifics now," Johnson said. However, Microsoft has yet to share details on what exactly it plans to offer.

Some analysts expect Microsoft to offer coupons for free, or nearly free, updates to Vista. However, the upgrade may only be to the basic version. That would mean customers will have to pay more for the Home Premium version of Vista, which includes the new Aero graphical interface, Media Center software and other features.

Alternatively, Microsoft could offer upgrades to Home Premium from today's Media Center Edition.

"Coupons make perfect sense," Endpoint Technologies Associates analyst Roger Kay said. "They ought to do it."

Cloud over sales
But NPD Group analyst Stephen Baker said it's not clear that even a free upgrade would be enough to keep PC sales from being dented significantly.

Microsoft had originally hoped to have Vista on sale for the November-December holiday season, even removing features in order to try to make that goal. However, in March, the company said the software wouldn't be ready for new PCs until January. That has cast a cloud over this year's holiday sales outlook.

"It adds a lot of uncertainty," Baker said. "It gives (gift shoppers) a reason to say, 'I won't buy a PC this holiday season. Maybe I will buy a flat-screen television.'"

Microsoft knew the minute it announced the Vista delay that it would have to come up with some sort of a program to help out retailers and PC companies, said Samir Bhavnani, an analyst at Current Analysis. Such an offer could help sway some people to buy a PC rather than spend their holiday budget on some other type of electronics.

"This will (encourage) that small percentage of people that are waiting to make a purchase," Bhavnani said.

Microsoft has continued to say that it is still finalizing the Vista offer. Some say, however, that the software maker and PC companies could just be staying mum about it so as not to hurt back-to-school season sales.

Kay said he believes the coupon offer will start in late October, noting that Microsoft probably has no incentive to lay out its plans until the back-to-school shopping season winds down at the end of September.

"Talking about it right now is probably not a good idea," Kay said.

The key question is whether Microsoft's offer is good enough to persuade buyers who are on the fence over whether to get a PC later this year. Kay said that with the exception of Windows 95, consumers have largely not changed their buying habits because of a pending operating system or chip introduction.

However, Baker said that customers may think twice about a PC purchase, even with an option to move to Vista, as they could be leery of having to upgrade their computers shortly after getting them.

"People don't want to buy ahead of such a big event, when they know having to do it on their own could cause problems," he said. Baker noted that sales expectations have already been somewhat muted.

"Everyone I've talked to, their expectation is for flattish sales this holiday," Baker said.

CNET News.com's Tom Krazit contributed to this report.