From FORTUNE
Can Windows XP save the economy? No Way.
Monday, November 12, 2001
By David Kirkpatrick
Windows XP may be an innovative product, but it is not going to pull the PC industry out of its doldrums anytime soon. No software upgrade could solve the kinds of severe problems PC makers are facing. Says Al Gillen, an analyst at International Data Corp.: "We don't expect XP to have any dramatic impact on PC sales."
Sure, down the road XP will be salutary for PC makers and the orbit of industries that depend on them. But in this dismal economy, consumers aren't eager to shell out money for additional technology. Even before Sept. 11, consumer interest in purchasing a new PC was at a four-year low, according to market researcher Odyssey. Says Gateway CEO Ted Waitt: "We're not counting on a whole bunch of people saying, 'Oh, XP's here. I'm going to run out and buy a PC.' " Pradeep Jotwani, who runs Hewlett-Packard's consumer products unit, is similarly restrained: "XP will be good for the industry. The question is when--and your guess is as good as mine." In fact, the best hopes for a consumer sales boost are in Latin America and Asia, where fewer people own PCs.
The boxmakers face a different set of woes in the corporate market. First, CEOs have ordered IT departments to pare spending. In addition, most companies bought furiously in late 1998 and early 1999 to prepare for Y2K. In industry parlance, corporate customers "refresh" their PCs every three years or so, making big company spending unlikely till late 2002. Says Michael Dell: "Business customers have a planned approach to their operating-system transition. They evaluate. They test." In other words, they'll upgrade when they're good and ready.
In this economy, then, XP is likely to prove less of a stimulus than past upgrades like Windows 95. But in the long run XP's many new features, especially its multimedia offerings, should accelerate sales of brand-new products and services. Bill Gates says that to judge the benefits of XP, you have to think of companies other than the usual suspects like HP and Compaq. "Only something like XP will get our industry back to setting records," he says. "But I'm thinking of the industry very broadly--I include memory chips, high-resolution liquid-crystal displays, 802.11 wireless networking systems, and big hard disks." For instance, XP makes it easy to set up instant conferences with audio, video, and document sharing. That's good news for Logitech, which sells many of the videocameras that attach to a PC. And in the long run XP should help chipmakers like Intel, AMD, Micron, and Samsung, which are in dire need of good news. Says Manoj Nadkarni, president of ChipInvestor.com: "Every time Microsoft comes out with a new operating system, it requires more system resources, including faster processors and more memory." Just don't hold your breath. Intel CEO Craig Barrett hesitates when asked when the new software will help his company. "Compared to what?" he asks. "This is so wrapped up in the overall economy it's hard to predict." |
