Though Microsoft has not disclosed pricing on the new operating system, Amazon has started taking orders before Windows XP's October 25 release. Amazon's price for the upgrade version of XP is US$10 more than a similar version of Windows Me, the current consumer operating system. The full version costs US$20 more than the corresponding Me release.
Amazon is offering the consumer Windows XP upgrade for US$100, or US$200 for the full version. That works out to about US$10 more than the street price for the upgrade to Windows Me or Windows 98 at its introduction. Amazon sells the commercial upgrade for US$200 and is offering the full commercial version for US$300.
Late Monday, Amazon pulled Windows XP product shots from its pages. Sources close to Microsoft said the company had asked Amazon to pull the items from the site altogether, but Amazon refused.
The average street price for Windows Me upgrades is US$90 and around US$180 for the full version. While some online and catalog dealers offer the Windows 2000 upgrade at a promotional price of about US$120, the more typical upgrade is US$189, or US$280 for the full version.
Microsoft declined to discuss Windows XP pricing. "We have not yet announced pricing for Windows XP and cannot confirm specifics at this time," said company spokesman Jim Cullinan. "Pricing will be announced in the coming months prior to launch."
But according to Amazon, these are the prices most people can expect to pay for Windows XP. "We got the price from Microsoft and are selling it at…manufacturers' authorized price," said company spokeswoman Ling Hong.
No matter what the final pricing, "I wouldn't expect the upgrade pricing to add much to Microsoft's revenue bottom line," said Peter O'Kelly, an analyst with Patricia Seybold Group. "Most people are going to be getting Windows XP (pre-installed) on new machines anyway."
Analysts have been watching Microsoft's pricing plan closely, as the basic features in the consumer and commercial versions of the new operating system are nearly identical. The most striking differences--networking and security features--are not that evident. The resulting customer confusion could make the lower-cost consumer version on the surface seem like a bargain to small and medium-sized businesses.
Consumers looking for more robust networking might also question whether Windows XP Professional might be the better choice.
"I am confused as to the differences between consumer and the professional version," said Carl Tyler, vice president of development and product management for on-line learning and support company Virtual Village. "If the professional version is better networked, then I want that at home. Like many people, I have more than one machine at home that is connected 24x7 to the Internet through a cable modem. Should I have less network capabilities because I use it at home?"
Because of the price gulf between the commercial and consumer Windows XP versions and similar basic features, "without a doubt some small businesses will go for the consumer versions", said Gartner analyst Michael Silver.
"Very small businesses already are buying consumer (versions) today and probably have Windows Me," Silver said. "To them the management features--Active Directory and policies--are much less important."
Microsoft will need to justify the cost of the consumer version, Silver added. "Microsoft doesn't want to be seen as raising prices significantly, but with consumers they're going to make the argument that they're going to get more, and NT technology has traditionally been priced higher."
The news comes as Microsoft moves into the second week of the Windows XP Preview Program, which is based on the operating system's first release candidate. Release candidates are final testing versions before the software is released to manufacturers and PC makers. About 100,000 people have paid up to US$20 to either download or receive a CD containing the Windows XP preview. A second release candidate is expected in late July or early August.
Windows XP will ship in two versions: Home and Professional. Basic features--among them Internet Explorer 6, Windows Media Player, Windows Messenger and an Internet firewall--are essentially identical. The Home version is the upgrade to Windows 95, 98 and Me, while Professional replaces Windows NT and 2000.
Even if Microsoft does raise the price of either version of Windows over earlier versions, the falling price of PCs will make the overall price lower for most people, O'Kelly said. He predicted that consumers and businesses "would be shocked at the price of computers when Windows XP is released in October". He said that "fairly loaded Pentium 4" models will sell for "considerably less than US$1,000, and pretty good notebooks for around US$1,200".
From that point of view, "Windows XP would actually cost less than Windows Me", he said.
To help boost PC sales, Microsoft, Intel, computer makers and retailers expect to spend as much as US$1 billion in a Windows XP marketing blitz.
Los Angeles-based freelance technical business consultant Richard Kravis said he is satisfied with the Windows XP pricing. "Microsoft seems to play the consumer excitement game very well with its pricing," he said. "This isn’t a simple upgrade for the average Windows user--it’s a completely new product, After all, we all interact with the interface, not the code. What’s a hundred bucks to get the top-of-the-line version?"