August 24, 2001 4:00 AM PDT

Microsoft stirs it up with Windows XP bash

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  Gates unveils Windows XP
Bill Gates, chairman, Microsoft, and Jim Allchin, VP, Microsoft platforms group
Microsoft on Friday will host a celebration marking the release of Windows XP to PC manufacturers, but the big question is how much interest the company can generate for the software.

At a lavish ceremony at the company's Redmond, Wash., headquarters, Microsoft Chairman Bill Gates and Jim Allchin, group vice president and head of the Windows effort, are expected to present each PC maker representative with a Windows XP-branded briefcase containing a master disc with the operating system's final--or gold--code. The group then is supposed to board a helicopter and fly off while the two Microsoft executives wave.

Software companies typically stage such events at the time the software is available at retailers. In the case of Windows XP, that date is still two months away.

As a result, Friday's celebration with manufacturers could be intended to send two messages: Microsoft is determined to push ahead with XP despite concerns by some competitors, lawmakers and privacy advocates. And PC makers hope Windows XP will spur sales of new PCs.

Microsoft on Friday also announced pricing for Windows XP. Windows XP Home Edition will cost $199 for the full version, and $99 for an upgrade version. Windows XP Professional will sell for $299 for the full version and $199 for the upgrade edition.

"Windows XP is the most important consumer product they've released since Windows 95, with maybe the exception of Internet Explorer," said Matt Rosoff, an analyst with Directions on Microsoft. "They're counting on it to drive a huge jump in revenue between the third quarter of the calendar year and the fourth quarter of the calendar year: between a 15 and 30 percent increase between the two quarters."

The ceremony also represents an early piece of a $1 billion industrywide marketing blitz--including at least $200 million from Microsoft--to promote Windows XP. The campaign, though, comes at a time when consumers seem numb to PC buying, and it's unclear if a new operating system will be enough to change their minds.

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Shawn Stanford, group product manager for Windows XP, discusses today's event and what consumers can expect from the new operating system. (6:20)  
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Sales are on the decline in 2001. Moreover, Microsoft faces a challenge in getting the world excited about an OS release. Compared with the upgrade whirlwind that followed Windows 95, the last three Windows OSes have been greeted with tepid applause. Consumers have bought Windows 98, Me and 2000 but generally have not seen the new OSes as a strong reason to upgrade.

So far, Windows XP beta testers have offered mixed reviews of the operating system, giving some indication of how consumers and businesses may perceive it.

"Overall, I'd say that Windows XP is worth the upgrade for someone who depends on Windows," said Scott Newberry, a tester from Edgewood, Ky. "I've been running Windows XP on my laptop since (Release Candidate 1), with no crashes to date. I can't say that for Windows 2000."

But Newberry found changes to the XP interface, while good for new users, to be "frustrating for Windows veterans."

"I also had some trouble getting used to the new 'Luna' interface and ended up switching back to classic Windows," said Joshua Franklin, an XP tester from Arkadelphia, Ark. "It makes me feel like my computer is a children's toy."

In Windows XP, Microsoft offers the option of using a new look and feel, called the Luna interface, or a more familiar Windows desktop. Luna will offer customers a more streamlined Windows look. It retains the Windows Start button but makes Internet connectivity, e-mail access and interaction with system settings via the Control Panel easier.


Meta Group weighs in on whether home computer users and businesses should upgrade to Microsoft's new OS.

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Ray Cham, a college student from Windsor, Ontario, by contrast finds the "new graphical user interface together with a new level of personalization make XP almost addicting." Cham also praised some of the new integrated features, such as integrated CD copying. "Everywhere there is a picture, video or music file there is a choice on the sidebar to copy it to a CD."

Cham, like many other beta testers, gave Windows XP's product activation feature a thumbs-down. The mechanism locks the software to the hardware configuration as part of Microsoft's efforts to fight piracy. Cham worried about "the message it's giving to other software companies who might be thinking of using this feature in their software. It would be a nightmare to have to activate everything on your computer."

Compatibility with older software could determine how successful the operating system will be, said IDC analyst Al Gillen. XP is built on the foundation of Windows 2000, which was notoriously finicky about running many consumer software titles. The test will be how well Microsoft has done overcoming this limitation.

"If the application compatibility isn't there, Windows XP will be a non-starter--at least for consumers," he said.

On that front, there is already grumbling about how it works with third-party CD software.

"I was very disappointed that WinXP is incompatible with my CD recording and (firewall) software, even though they work on both Windows 9x/Me and 2000," he said. "It's also suspicious given Microsoft's inclusion of its own (firewall) software and basic CD recording."

A big party
It wasn't long ago that release to manufacturing--or RTM--was an insider non-event. The real fireworks and celebration were reserved for ceremonies marking the commercial release of new Windows versions, such as the launch of Windows 95 six years ago. That extravaganza was marked by appearances from celebrities including Jay Leno and by Microsoft's licensing of the Rolling Stones song "Start Me Up."

Microsoft executives have said the final tally for Windows XP's launch will double what the company spent to launch Windows 95. The company has not disclosed details of a second celebration planned for Oct. 25, this time to mark the commercial release of Windows XP.

For Microsoft, Windows XP--perhaps more than any other operating system release--is a turning point in the company's future, analysts say. Branded a monopoly, struggling against competition from older Windows versions, and preparing to jump into the world of Web services, Microsoft is pushing XP into an uncertain environment.

Turning the release of gold masters to PC makers into a photo op only signifies how much Microsoft and its partners have riding on the new operating system.

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  Is XP being pushed out too soon?
Ernest Gellhorn, professor, George Mason University School of Law, and Chris LeTocq, analyst, Guernsey Research

Changing trends
The ceremony also signifies a significant change in style. Microsoft typically holds a single lavish event for a product's official launch--in the case of Windows XP, Oct. 25. But that date only signifies the software's commercial release to consumers. Now, all-important PC makers, which will sell the bulk of Windows XP pre-loaded on computers, loom larger in Microsoft's financial picture.

"In the past, launch date was everything," said Guernsey Research analyst Chris LeTocq. "But frankly, retail matters a lot less to Microsoft now."

Since PC makers can begin selling Windows XP systems starting Sept. 24, Friday's event is more than symbolic, Rosoff said. "Everyone is counting on Windows XP to revitalize this industry, so the (PC makers) have a reason to participate in this kind of event."

The timing of the commemorative code hand-off is not accidental and follows a straight line to launch--Aug. 24, RTM; Sept. 24, new XP PCs; Oct. 25, retail launch--LeTocq said.

"When Microsoft talked about the $200 million investment, they wanted to get the word going that this is not just another OS," he said. "They're fighting the perception this is just another OS and have developed a clear marketing approach from RTM to delivery."

But just another version of Windows is exactly how many people may view XP, said IDC's Gillen.

"XP has a lot of interesting features, but I don't think it's going to be perceived as an important upgrade because people are going to have to purchase new hardware," he explained. "Because of that, people are not going to be running out to buy XP for their old (Pentium) 500 systems. As a result, it's going to be hard to get quite as excited as it was about the Windows 95 launch."

This also explains some of the emphasis on PC makers and why Microsoft has turned giving them RTM code into a big event. With computer sales at record lows, "it is important to get the buzz out there as early as possible," LeTocq said.

Still, Microsoft is hoping for big interest in upgrades, which is one reason Windows XP's real launch--the one in October--centers on retail. But the challenge there is convincing people they need to upgrade, particularly from older consumer Windows versions.

"Microsoft's competition is the installed base, so they must convince people there is enough reason there to upgrade from older versions of Windows," LeTocq said.

 

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