Microsoft Corp on Saturday released the last test version of its newest Windows operating system for personal computers, a program it hopes will spark a recovery in sales of PCs and software.
The timing of the so-called second release candidate, which has all the features of the final version and is meant as a test for last-minute bugs, signals that the company is likely to deliver Windows XP as scheduled on Oct. 25, analysts said. Microsoft Group Vice President Jim Allchin said the product will be on time.
The largest software maker has had to delay products in the past. Business operating-system software Windows 2000 went on sale almost two years after it was originally expected, and the company missed the promised date for its interactive-television software last year. A delay in Windows XP, which is already arriving too late for back-to-school PC sales, could cause Microsoft and PC makers to miss out on the holiday sales season.
"Any chance of a fourth-quarter technology and PC recovery would be destroyed if XP doesn't ship," said Rob Enderle, an analyst at Giga Information Group. "Jobs would be lost. It really would have a big impact."
Consumers were able to sign up to download both release candidates, the last two test versions before the final product is released to be manufactured and installed in new computers.
Analysts expect Microsoft to finish the code and release it to PC makers and manufacturers of Microsoft compact discs by the end of August. Enderle estimated that there's still a 20 percent to 25 percent chance the product could be delayed for legal reasons.
A federal appeals court ruled June 28 that the software maker had illegally protected its Windows operating-system monopoly. The court threw out an order that Microsoft be broken up and ordered a trial judge to weigh new remedies.
The US Justice Department and 18 states want the case immediately returned to a trial judge to curb Microsoft's anticompetitive behavior. Microsoft said it may appeal the case to the US Supreme Court, which could delay limits on its business practices until after Windows XP hits stores.
Antitrust enforcers last week with Microsoft lawyers for about 90 minutes to discuss a possible framework for settlement talks. State officials have suggested they want to alter Windows XP as part of such talks or during the new hearings on remedies. Any court-ordered changes could force a delay in the product's release.
The release of Windows XP, the new version of the program that runs about 90 percent of PCs, has the potential to boost both Microsoft's sales and those of PC makers, such as Dell Computer Corp and Compaq Computer Corp. PC sales fell last quarter from a year earlier for the first time since 1986, according to a report from market researcher Dataquest Inc.
Enderle estimated that the PC industry could lose US$2.5 billion to US$5 billion in sales if Windows XP isn't available for the holiday season and an additional US$1.5 billion to US$3 billion in sales of PC accessories. Microsoft could lose US$500 million to US$1 billion in sales, he said.
Microsoft isn't predicting the product will fuel a huge jump in PC sales immediately. CFO John Connors said the company expects PC sales to rise in the "mid-single digits" for the fiscal year that ends June 30, an improvement over last quarter but well below the almost 16 percent growth in calendar 2000 and 24 percent in 1999.
Allchin, who heads Microsoft's Windows division, said the company isn't developing a contingency plan for Windows in case of successful legal action against the product.
"I can't speculate on what might happen," he said.
Antitrust officials are weighing what action to take against Windows XP. State antitrust enforcers have voiced concern that Microsoft is using XP to expand its operating-system monopoly to Internet services, by adding to XP its programs to play digital music, make Internet phone calls and send instant messages.
Last week, Senator Charles Schumer, a New York Democrat, called on state attorneys general to seek a court order halting the planned release of Windows XP unless Microsoft agrees to make "significant changes." US Justice Department officials also should insist on changes during any negotiations aimed at settling the government's antitrust lawsuit, he said.
Experts say antitrust enforcers may have a hard time convincing a court to halt or delay the release of Windows XP. Any attempt is likely to provoke protests from PC makers, which are spending millions of dollars to combine with Microsoft and Intel Corp in a US$1 billion Windows XP marketing campaign.
"If there is a big legal challenge, the PC makers are going to howl long and hard," said Chris Le Tocq, an analyst at research firm Guernsey Research.
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