Microsoft Ships XP, Hoping to Revive Sales
Hoping to revive the moribund personal computer industry, Microsoft Corp. on Friday released its Windows XP software to PC makers--the final production hurdle before the product can appear in stores Oct. 25.
Under pressure from beleaguered PC makers, Microsoft accelerated the release of Windows XP in hopes of stimulating back-to-school and holiday-season sales. The industry is suffering from slowing sales for the first time. Traditionally, the last three months of the year represent as much as 60% of annual revenue for the computer industry.
“If Windows XP didn’t ship now, we would be talking about a cold Christmas indeed,” said Rob Enderle, a senior technology analyst for Giga Information Group, a consulting firm in Santa Clara, Calif. “Windows XP, by itself, is not enough to fix the industry’s problems, but it may be enough to mitigate the worst damage.”
The release of Windows XP diminishes the possibility that Microsoft will be forced to modify the operating system in response to anti-competitive concerns raised by rivals and some members of Congress.
Critics had complained that expanded multimedia and communications features in Windows XP--such as instant messaging, a music and video player and digital photography software--would enable Microsoft to leverage its monopoly into other markets.
These critics wanted antitrust officials to go to court to block the shipment of Windows XP, saying that the software includes many of the same anti-competitive features ruled illegal by a federal appeals court. But government attorneys say they have no such plans.
However, Microsoft did modify at least two features of Windows XP after public protests.
The software giant removed “smart tags” from Internet Explorer. Smart tags are an automatic feature that often directed Web surfers to sites operated by Microsoft or its business partners. After protests from Eastman Kodak Co., Microsoft modified Windows XP to make it easier for third-party digital photography software to work with the operating system.
Windows XP still includes a controversial “product activation” feature that, for the first time, will require Windows users to call Microsoft or visit the company’s Web site to get a 42-digit number to unlock Windows XP. Otherwise, the software stops working after 30 days.
Microsoft says the feature will help combat piracy of the home-upgrade version, priced at $99, and the professional upgrade, priced at $199. Although Windows XP probably will be activated in new PCs, users will have to renew the activation if they substantially upgrade their computer hardware.
A poll of visitors to PCWorld.com, publisher of San Francisco-based PC World magazine, found “a near-unanimous thumbs-down” to product activation. Experts say the feature could trigger a consumer backlash that would further dampen PC sales.
“They are making the customer jump through more hoops with product activation; that’s always bad,” said Brian Neal, owner and publisher of Ace’s Hardware, a computer enthusiast Web site.
The release of a new version of Windows traditionally has given a boost to the computer industry. When Microsoft introduced Windows 95 six years ago, it created such a sensation that consumers lined up outside stores at midnight to get first crack at the product.
But the new Windows will be a greater challenge, despite Microsoft’s $1-billion marketing campaign.
After selling more than 500 million computers over the last 20 years, the PC business has begun to reach the saturation point. Many consumers now see little reason to upgrade computers.
“I’ve talked to many companies that haven’t even upgraded to Windows 2000,” Microsoft’s most recent operating system, Neal said. “The product-upgrade cycle has become real weak for Microsoft.”
Shares of Microsoft closed up $2.93 to $62.05 in Nasdaq trading Friday.
