Vendors prep Windows XP PCs, sales uncertain

A variety of major PC vendors have begun taking orders for new PCs and laptops that feature Microsoft Corp.’s new Windows XP operating system, but analysts and economists now worry that the anticipated operating system may face a cold consumer market in the wake of Tuesday’s terrorist attacks on New York and the Pentagon.

Microsoft plans to officially release the software on Oct. 25, when it will begin selling packaged versions of the operating system in retail stores. PC vendors, however, were cleared to begin selling new computers with Windows XP pre-installed after receiving the manufacturer’s version of the operating system, known as the “gold code.”

Microsoft released that software at a flashy press conference on Aug. 24 at its headquarters in Redmond, Washington. Since then, PC makers have spent the past month installing and testing the system on their computers. Monday, Hewlett-Packard Co. and Dell Computer Corp. became the latest to put the operating system up for sale on their PCs.

While the push to sell the long-awaited operating system is reaching critical mass, new fears over a drop in consumer spending threatens to stunt predictions of a year-end growth of PC sales. Analysts, and a number of PC vendors, including HP, have said that they expected Windows XP to be the driver for an upswing in spending on personal computers.

However, businesses that lost part of their IT infrastructure when the World Trade Center and surrounding buildings were destroyed will spend most of their IT budgets on increasing computer and network security, not on installing a new operating system, said Rob Enderle, an analyst with Giga Information Group Inc.

“Windows XP is not positioned as a product that offers increased security,” Enderle said.

Analysts from International Data Corp. (IDC) also predict that Microsoft’s corporate customers won’t start migrating to the new operating system until some time in 2002. The research company said in a research report Monday that a surge in sales of Windows XP licenses won’t necessarily mean that Microsoft will increase its operating system sales.

Many of those companies that do upgrade to the Professional version of Windows XP will do so because of changes in Microsoft’s volume licensing program, which now requires customers to upgrade to the current operating system soon after it becomes available. As a result, IDC analysts said some sales of Windows XP licenses will come at the expense of what would have been upgrades to other Microsoft operating systems, especially Windows 2000.

In addition, Microsoft has spent much of its marketing budget pitching the new operating system to consumers, not to large corporations and organizations. The company has said it will spend roughly US$200 million marketing Windows XP, aimed at an estimated 320 million customers that either have computers capable of being upgraded to the new operating system or those that potentially could buy a new system, Microsoft said.

Now economists are undecided on how consumer confidence, a key economic indicator, will be affected in the wake of Tuesday’s terrorist attacks. The Conference Board, which reports statistics that gauge how optimistic consumers are about spending money, said it will release its next consumer confidence report on Sept. 25. That statement will reflect reactions from last weeks events, the group said.

While consumer confidence is expected to be somewhat “distorted,” the economic committee said it could not yet predict the long term prospects of consumer spending.

“It has been our experience that consumers can react swiftly and negatively to heightened uncertainty – as was the case in the Persian Gulf crisis,” said Gail Fosler, senior vice president and chief economist with the Conference Board, in a statement Thursday. “How financial and labor markets react over the next several weeks and the behavior of gasoline prices, the real estate markets, and other economic forces that touch peoples’ lives will drive consumers’ reactions.”

Enderle predicted that the U.S. government will also play a large role in reassuring consumers about economic conditions. “We expect a big push by the government to get people to go out and buy,” he said. “There’s a lot of nationalist fervor and if that gets properly focused we might actually see an uptick in PC sales.”

Some of the vendors already taking orders for PCs loaded with Windows XP are:

— Dell Computer Corp. began selling on its Web site Friday PCs and laptops loaded with Windows XP, a spokesman for the company said Monday. Customers who purchase Windows XP PCs from Dell will receive the new computers within 10 days.

— HP also said Monday that it will start taking orders through its direct sales channels for two desktop computers and two laptops configured with Windows XP: HP’s Pavilion 7955 and Pavilion 7935 desktop PCs, and the Pavilion N5425 and Pavilion N5415 notebook PCs. Customers who want to custom configure new PCs will be able to do so on Friday. HP also said that its new Windows XP machines could reach retail shelves on Sept. 24.

— Gateway Inc. started taking orders for Windows XP machines through its direct sales channels early this month, noting that it expecting to ship machines within the next two weeks.

— Compaq Computer Corp. last week began taking orders for its computers that include a free upgrade to the new operating. IBM Corp. and Sony Corp. are also expected to follow suit.