Commentary: A blue Christmas without Vista

By Paul Jackson and Ted Schadler

Microsoft has delayed the shipment of Windows Vista to consumers until after the holiday shopping season.

It's a smart move, given the product's importance and longevity--but disappointing and harmful to PC manufacturers, Intel and retailers expecting a fourth-quarter lift in PC sales. However, Intel gets an unexpected bonus: the opportunity to make Viiv the digital home brand that matters in 2006.

Windows chief Jim Allchin announced on Tuesday--after the stock market closed--that Microsoft will ship Windows Vista to companies signed up to its Volume License Agreement in November, as expected, but will delay shrink-wrapped Windows Vista for consumers and business until early 2007. This came as no surprise to Forrester; in our discussions with Allchin in January, he was a bit cagey about the delivery date. What does this mean for Microsoft and its key partners?

• For Microsoft, the delay is embarrassing, but intelligent. The Redmond giant claims that Vista needs more fine-tuning, especially on security features--a core selling point of the new operating system--and that several partners requested that it wait until 2007.

Given Windows' history as buggy and unsecured, it's just plain smart to delay the release rather than ship a flawed product. However, five years and counting between operating-system releases and a steadily diminishing feature list does make Microsoft look a bit foolish. Ongoing sales of Windows XP, and the fact that Microsoft's fiscal year ends in June rather than December, protect the company financially.

Roundup
Vista delayed beyond holidays

Crucial season for PC sales is in jeopardy as new operating system hits a speed bump.

• Intel, HP, Dell and PC retailers are the real losers here. As with many consumer electronics and technology categories, consumer spending peaks in the fourth quarter, around the holiday season. But with Vista postponed until 2007, Microsoft and its partners will miss this opportunity to sell Vista-powered PCs.

Worst case: Consumers don't buy the PC they had intended to purchase in 2006, and are tapped out and unable to buy when Vista machines do finally appear. PC makers will do their best to avoid this catastrophe by selling Vista-ready machines with coupons for a free Vista upgrade. Still, that's an administrative cost that they could have largely avoided.

• Intel does get a chance to make Viiv, rather than Vista, the centerpiece of the digital home. A grand brand battle is taking shape for the hearts and minds of consumers' entertainment spending: Intel Viiv versus Microsoft Vista. The two grumpy old partners seemed to have worked this out with a dual-branding approach. But now Intel will have the holiday season to itself to make Viiv the dominant digital-home brand in 2006.

© 2005, Forrester Research, Inc. All rights reserved. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.