Gotta get to XP.
The Big X-Factor in XP
By Monica Rivituso
August 15, 2001
IN 1995, MICROSOFT (MSFT) unleashed its breakthrough operating system, Windows 95, on an eager market. There had been a gnawing concern about PC sales that year, and manufacturers viewed the holiday selling season as make-or-break. Meanwhile, technology stocks were sliding and company profits were slowing from their torrid pace. What happened? Sales of Windows 95 quickly shot to the moon, and the PC business was boosted as a result.
Fast forward to 2001. Tech stocks have plunged, PC sales are in the dumps and Microsoft is poised to release Windows XP, billed as the biggest product the Redmond, Wash.-based software shop has churned out since Windows 95.
Will history repeat itself? We aren't so sure.
Windows 95 was a truly revolutionary product for PCs. Its robust new underlying code and its intuitive user interface finally gave PC users what Apple Computer (AAPL) devotees had always enjoyed — an easy-to-use operating system, free of DOS commands and work groups and all the other pains in the neck of previous systems. The new product created such a buzz that consumers lined up outside stores — some staying overnight — to get their hands on a copy. The must-have OS also required beefier hardware, which sparked a wave of PC buying from corporations and consumers alike.
But that might not happen this time around. For starters, Windows XP is really geared to consumers only. While there will be a professional version of XP, corporations got their fancy new OS last year, when Microsoft released Windows 2000. The lack of corporate demand for XP automatically relegates it to second place, at best, in the annals of Microsoft OS launches.
Even so, some think XP's functional improvements are compelling. Rob Enderle, research fellow at Giga Information Group, ticks off an extensive list. First, it's a more reliable platform — and for anyone who's struggled with its crash-prone predecessor, Windows 98, that's a welcome improvement. It's also more secure, boasting an Internet firewall, Enderle says, so users can feel comfortable leaving the computer on and connected to the Internet 24/7. And XP offers better integration of multimedia, scanning and networking capabilities as well. "This gives the benefits to the general consumer that the corporate user has had for a number of years [with Windows 2000]," says Enderle. "It brings them into the fold of having a truly robust operating system, when before they kind of had a hybrid toy." (For a detailed appraisal of Windows XP, see tech guru Walter Mossberg's "Cleaner Windows.")
Stephen Baker, an analyst at market research firm NPD Intelect, is expecting big things from XP. He says it'll offer consumers better support for peripherals like scanners, printers, LCD monitors and consumer electronics, all of which are becoming increasingly important to the computing experience. Although this might sound trivial when compared with the major leap forward of Windows 95, it's an advance nevertheless. "There are so many more people who are so much more savvy [these days]," he says. "They understand the value of these kinds of benefits."
Box makers like Compaq (CPQ) and Dell (DELL) sure hope he's right. Microsoft says XP won't run very well on machines that were made before 2000, and will require at least 128 megabytes of memory. So hot demand for the operating system could be a real boost for the box makers. And standing behind them is an entire food chain of companies salivating at just that prospect, including chip makers (which realize roughly half of their sales from PCs), chip-equipment makers, PC distributors and retailers. Plenty of companies — from Intel (INTC) and Advanced Micro Devices (AMD) to Applied Materials (AMAT) and Novellus Systems (NVLS) — have their near-term economic fortunes riding on the success of XP. Two weeks ago, for example, Intel Chief Executive Craig Barrett reiterated his belief that the PC industry would see an uptick in sales in the second half of the year, thanks in part to XP.
But skeptics are already lining up around the block. Roger Kay, director of client computing at market-research firm IDC, for example, says that XP offers only slightly different and somewhat better features, rather than a substantial technology shift. The new goodies won't be enough to entice consumers to go through the hassle of integrating their existing files onto a new system, let alone plunking down the $100 or so it will cost to upgrade to the new software. "If you look at XP, [Microsoft has] bolted together a few features like a better media player — but you already had a media player, and better NetMeeting [real-time video and audio conferencing] — but you already had NetMeeting. XP is more integrated, runs better and offers some new features, but it's not really a quantum change in the way people compute," he says.
Brett Miller of A.G. Edwards agrees. "Are people going to run out and buy a new PC because of it?" he asks. "No."
Indeed, most people will pony up for a new PC only if it offers a far richer computing experience, says Kay. That means a combination of several things — high-speed access from communications companies, a groundbreaking OS and whiz-bang applications designed specifically for it. Windows XP is only a part of this complex equation. Sure, there'll be the usual tire kicking by some, but Kay isn't looking for a big PC sales spike. He's thinks XP will provide a "mild stimulus" at best.
And there's another hurdle XP will need to navigate around — a jaded audience. After all, this isn't 1995, when Microsoft was still a technology wunderkind. These days, consumers have just about had their fill of news of the company's ongoing legal battles and allegations of its predatory business practices. The planned $1 billion advertising blitz for XP could repel more people than it attracts.
Put it all together, and XP clearly has a bit of work ahead of it. "Windows 95 came to market like a hot knife through butter," says Enderle. "This one is more like a dull knife through an uncooked potato." |
