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Microsoft Launches Windows XP

A veritable who’s who of computer industry leaders, New York politicians and celebrities helped Microsoft’s Bill Gates launch the Windows XP operating system last week, but many questioned whether XP’s benefits will encourage consumers to open their wallets.

The kickoff of Microsoft’s $200 million worldwide marketing and advertising campaign, geared toward convincing consumers and businesses to upgrade to this heavily revamped version of Windows, was part glitz — Regis Philbin made an appearance, receiving a lesson in XP’s capabilities — and part dead-serious debate on whether the operating system might bail the industry out of its sales doldrums.

The event’s main message was that XP will deliver a better multimedia experience for the user and enable the PC to become the center of a home entertainment system. Equally important is the fact that XP is not based on the same code as previous versions of Windows, which were which highly unstable, causing computers to crash.

“Microsoft said a decade ago that the Windows 95 code was not rich enough for where we wanted to go so we built Windows NT. But that was always for the high-end, but with Windows XP we can get all versions of Windows on one code base,” Gates said.

About 100,000 pre-orders for the consumer upgrade version of XP have been taken at $99 each, double the number posted by Windows 95, and almost 30 million XP-ready PCs have been shipped since June. Another 5 million computers with XP are now on retailer’s shelves, Gates said. Windows XP Professional has a $199 street price.

The fact that eight of the industry top players were on hand for the launch indicated how important XP has become to the PC industry. Joining Gates was Carly Fiorina, Hewlett-Packard’s CEO, Michael Dell, CEO of Dell Computers, Ted Waitt, CEO of Gateway, Craig Barrett, Intel’s CEO, Michael Cappellas, CEO of Compaq Computers, and executives from Sony, Toshiba and Staples. Despite showing their support for XP, several stated that XP will not give a near-term boost to PC sales.

Staples’ CEO Tom Stemberg thought the stability offered with XP would draw for the SoHo market. “Nobody has been happy with the reliability of Windows so this [XP] will be a huge benefit for small businesses,” he said.

Dell was the most optimistic of the CEOs on hand. With his company being the only major computer maker to increase its shipments and share in the third quarter, he expects Dell will post further gains in the fourth quarter with XP contributing customers along with the usual boost gained from holiday shoppers.

Waitt expressed a polar opposite opinion. “We are not forecasting a huge uplift due to Windows XP because of the times we are in,” he said, adding that XP-generated sales will take place further down the road.

Cappellas and Fiorina appeared somewhat shocked at Dell’s upbeat projection. Fiorina expects XP to help peripheral product sales, but have little impact on PCs. XP’s built-in music, digital imaging and video editing abilities should help those product areas. Cappellas, who saw Compaq ship almost 50 percent fewer PCs in the third quarter compared to the same period last year, said there is a lot of pent-up demand for PCs, but vendors need to give people a more compelling reason to go out and make a purchase.

Industry analysts, many of whom expected XP to deliver a positive impact to the PC industry, have reversed course.