October 25, 2001 10:30 AM PDT
Windows XP has long road to top
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Windows XP, set to arrive on store shelves Thursday, will dominate business PCs in 2003 and home PCs in 2004, Gartner said in a new report.
The report paints a sobering picture for Microsoft, PC makers or anyone else expecting Windows sales to take off with XP the way they did with Windows 95 six years ago.
Despite rich new features for the two versions of XP--Home for consumers and Professional for businesses--most users won't switch operating systems until they buy new PCs, Gartner said.
About 10 percent of new consumer PCs shipped in 2001 will pack Windows XP, even after one full quarter of shipments during what should be the strongest PC sales period of the year. Computer makers started selling XP PCs Sept. 24.
By comparison, Windows 95, which shipped in August 1995, went out on 30 percent of Windows PCs shipped that year. In 2000, about 11 percent of new PCs shipped with Windows Me, which was released in September of that year.
"The absolute number of units will be large, but the percentage will be lower than it was with Windows 95," acknowledged John Connors, Microsoft's chief financial officer, on Thursday at the San Francisco Windows XP launch event.
Connors said PCs sold from the end of 1999 onward would be powerful enough to run Windows XP. He estimated that number to be about 180 million computers.
During the fourth quarter of this year, Gartner says, slightly less than 40 percent of new PCs shipped will have XP.
Gartner analyst Michael Silver blamed the low number of new Windows XP PCs on lingering old inventory and the soft market for PCs. Overall, the market research firm expects worldwide PC sales to decline about 13 percent year over year in the fourth quarter.
"All the money Microsoft, Intel and everybody else is spending will have an effect, but it's not enough to overcome the economic slowdown," Silver said.
Combined, Microsoft, Intel, computer makers and retailers are expected to spend about $1 billion promoting Windows XP and PCs running it.
ARS analyst Toni Duboise expects "Windows XP to have a nominal impact on fourth-quarter PC sales."
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"That's the real story here, that Windows 2000 will be much more," Silver said.
For comparison, IDC, which used a different metric, projected 67 percent of Microsoft's worldwide licensing shipments next year would be Windows XP. That works out to 73 million licensed copies of the OS.
Gartner predicts that only 26 percent of consumer PCs will run Windows XP Home in 2002, with about 71 percent sticking to older versions. By 2003, XP Home will close the gap to 48 percent, but Gartner does not expect the OS to pass older versions until 2004. That year, more than 70 percent of consumer PCs should be running XP Home.
"In 2002, the estimate is that 57 percent will be Windows 9.x (95, 98 or Me) as the installed base for commercial" PCs, Silver said. "In 2000, about 80 percent of commercial desktops (ran on) 9.x."
Mark Romanowski, senior vice president with New York-based IT consultancy AMC, said he won't be surprised to see businesses move slowly to XP.
"Many businesses are just now looking at Windows 2000 or (are) in the process of migrating," he said. "They're just not thinking about XP."
Duboise raised concerns about one new feature--product activation--that may prevent "quite a lot of people from going to XP." Part of Microsoft's effort to fight piracy, product activation requires users to "lock" a copy of Windows XP to a particular PC by submitting registration information over the phone or the Internet.
"Product activation...will definitely keep me from jumping right in and getting a copy when it first comes out," said James Farmer, a Windows user from North Charleston, S.C. But he does hope to make a move to Windows XP within six months, already bulking up his PC to 512MB of memory.
Still, not all the news is grim. Online retail giant Amazon.com reported that Windows XP had the most advance orders of any non-game software ever offered. The Home and Professional upgrade versions and add-on pack Plus! for Windows XP have taken the top three software sales slots since Oct. 1, Amazon reported.