Windows XP to be pricier than 2000, Me

Microsoft announces Windows XP pricing, and as expected, consumers will pay a little more for Microsoft's new operating system than for previous versions.

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Chris Jones, VP, Microsoft Windows client division
Microsoft on Friday revealed final retail pricing for Windows XP, a day after Amazon.com leaked the information on the Web for a second time.

The bottom line: Consumers can expect to pay a little more for XP than for previous Windows versions, with street price increases ranging up to about 10 percent.

Windows XP comes in two flavors, one for home users and the other for business professionals. For those who are upgrading, the Home Edition carries a manufacturer's authorized price (MAP) of $99, or about $10 more than Windows Me. Those buying the full version will have to pay $199, an increase of about $20.

The Professional Edition will cost around $199 as an upgrade or $299 for the full version, which in both instances is about a $20 increase over Windows 2000. But compared to a special $120 promotional offer for Windows 2000 Professional, the commercial XP version will cost nearly $80 more.

On Thursday, Amazon had started taking preorders for the new operating system, which doesn't go on sale until Oct. 25, but pulled the offer after several hours.

Microsoft officially got the launch under way Friday, the first step in what will be an industrywide, billion-dollar promotional blitz--in which Microsoft itself will spend $200 million--leading up Windows XP's retail launch in October. The company released final code to PC makers, which they'll use to install Windows XP on new computers. New Windows XP PCs unofficially go on sale Sept. 24.

Microsoft's biggest challenge in selling Windows XP may come from explaining the differences between the consumer and commercial editions, say analysts. Most of the major features are identical, and most users won't know the difference until they get down into the new operating system's plumbing.

Among the differences: multiple-processor support, corporate network connection and management, remote access, file encryption and more security features.

But many of those features won't mean much for small business, which may see Windows XP Home as a good buy, said NPD Intelect analyst Stephen Baker.

"How is Microsoft going to convince them they need to pay $100 more for the commercial version, when the Home (Edition) looks pretty good?" he asked. Already, Windows Me is popular with smaller dealers building no-name systems known in the industry as white boxes. "With pricing so competitive right now, it makes sense they would go for what's cheaper, given there's no obvious benefit to the user."

That could also spill into Windows XP systems sold by Dell Computer or Gateway, both of which sell aggressively to small businesses, Baker added.

Microsoft hasn't face this quandary in the past because the consumer and commercial versions of Windows came from different heritages. Windows 98 and Me evolved from DOS and Windows 3.11, a lineage that offered consumers the best backward compatibility for everyday software, but these consumer versions were notoriously insecure and unstable. The commercial versions, Windows NT and 2000, were built with stability and security in mind, and also offered features such as greater software and hardware support.

But with Windows XP, Microsoft has moved to a common code base and made the basic features nearly identical. Both versions, for example, offer MP3 song attributes and playback from any folder, which may not appeal to many businesses. Windows Messenger--XP's communications console delivering instant messaging and videoconferencing--also lets customers share applications. That's a feature potentially more appealing to businesses than consumers.

Differentiation "could be a problem," Baker said.

Windows XP Preview Program participant Steve Schnibbe predicted that the pricing could be a problem for Windows XP Professional sales.

"This would have been fine if all of this had happened last year," because of the "significant" jump to Windows 2000 from NT, he said. Schnibbe also wondered about the features in the commercial and consumer versions being too similar.

Schnibbe plans to stick with Windows 2000. "But I certainly wouldn't dissuade friends and neighbors from going with XP Home," he added.