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Microsoft Vista Delayed Until January ’07

Microsoft’s decision to push the shipment of its much anticipated Vista operating system into January 2007 is giving some retailers and analysts reason to think the 2006 holiday selling season will not be as rosy as originally expected.

The company released the news on March 21 that Vista would be ready for its retail launch in January 2007 and not in the second half of 2006. Retailers, PC vendors and peripheral-product makers were all set to tie into the launch, but these plans are now on hold.

Microsoft’s history of missing shipment deadlines helped cushion the blow, but Vista’s absence will leave a gaping hole in retailer and vendor holiday plans. CompUSA president/CEO Larry Mondry said that he was not surprised by the news, and while it is not a disaster, there will be repercussions.

“The date of the launch itself is not that important,” Mondry said. “But now we have to come up with some way to fill the void.”

At this point Mondry’s main concern is the timing of the release. In the 60 or so days before a launch there is always a slowdown in business as customers hold off purchases and with that period coinciding with the holidays it could cause problems.

“What if people say I want to wait [for Vista]? Then I’m stuck with inventory,” he said.

Steve Baker, The NPD Group’s research director, called the delay an unfortunate occurrence, but thinks consumers determined to buy technology will simply walk out of stores with something besides a Vista PC, a fact that does not bode well for PC vendors.

Best Buy and Circuit City’s response to the news was supportive of Microsoft’s decision.

“We agree with Microsoft that it’s best to do this right — and in this case it’s delivering Windows Vista-based PCs with confidence in January 2007,” said Ron Boire, executive VP and general merchandising manager at Best Buy. The statement was contained inside Microsoft’s statement announcing the new ship date.

Separately, Circuit City stated its support for Microsoft’s decision, adding that since the retailer has not made any projections on holiday sales, it would be inappropriate to say what impact the delay will have later this year.

Bank of America analyst David Strasser painted a somewhat different picture. He is forecasting a severe retail impact with about 500,000 Vista-related PC sales now failing to take place. He has Best Buy and Circuit City taking the brunt of this loss with Best Buy losing perhaps 100,000 sales and Circuit about 30,000. In addition, Strasser stated that the excitement surrounding Vista’s launch was expected to drive a great deal of general store traffic.

Manufacturers also find themselves in a touchy position, said Charles Smulders, Gartner’s managing VP. “I think vendors with a strong consumer ties such as HP and Gateway will be disappointed by the announcement. Vista’s delay is likely to dampen demand during the fourth quarter, forcing them to cut prices to maintain growth momentum,” Smulders said.

Baker said the PC OEMs will be the hardest hit, but the fact that Microsoft made this announcement now and not in August gives the vendors enough time to reconfigure their holiday plans.

HP, whose comment was also included in the Microsoft release, and Gateway issued blanket statements on the situation that contradicted Smulder’s opinion.

“We strongly support Microsoft’s decision to prioritize quality in determining the schedule for Windows Vista,” said HP’s Todd Bradley, executive VP, personal systems group.

Gateway said, “This allows us to prepare for the holidays in a more orderly fashion, and regardless of the actual timing, our PCs will be fully Vista-ready well in advance of Microsoft’s introduction.”

Adding to the situation is a healthy dose of skepticism on whether Microsoft will hit its new launch date. “Until it comes out I won’t say when it will come out,” said Mondry.

Microsoft never gave an official launch date for Vista other than indicating it would ship in the second half of 2006; however, it was accepted in the industry that it would be available in stores and new computers by October or November. This is the period when Microsoft released Windows XP and Millennium; Windows 98 came in June and Windows 95 in late August. Microsoft said that a January launch for Vista will enable it to ship a better quality product with a better out-of-box experience for the consumer.

The company will ship the commercial version of the software in November to give IT departments a chance to test and integrate Vista into their systems.