Windows XP to drop in on Friday

Microsoft is planning an elaborate publicity stunt on Friday--delivering the new operating system to PC makers via helicopter in Redmond, Washington.

Microsoft, under pressure from several sides to get its new operating system out the door, on Friday will deliver final Windows XP code to PC makers in a big way: via airdrop.

In a stunt involving Microsoft chairman Bill Gates and group vice president Jim Allchin, helicopters will circle the company's Redmond, Washington, headquarters as the pair hand off Windows XP to PC makers, said sources familiar with the event. The helicopters are expected to be decorated with Windows XP and major PC maker logos.

Several PC makers on Tuesday confirmed Microsoft had told them they would receive final--or gold--Windows XP code Friday. Computer manufacturers will use these gold masters to install the operating system on new PCs.

Microsoft is expected to sign off on Windows XP as ready for release to manufacturing as early as Wednesday but maybe not until Thursday, according to sources close to the company and PC makers. Microsoft earlier told computer manufacturers to expect final code Aug 22 but pushed back delivery for final tweaking.

Microsoft is under pressure from several sides as it pushes Windows XP out the door. PC makers are counting on the new operating system--due on new PCs starting Sept 24 and as packaged software Oct 25 for its retail launch--to boost lagging sales. Meanwhile, government trustbusters are giving conflicting signals about whether they plan to seek an injunction to block release of the software.

"The sooner they get it out, the more likely they are not to be restricted by the courts," said ARS analyst Toni Duboise. "It's going to be good they have it out by the fourth quarter, but I don't see it doing much for PC sales."

Windows XP is expected to come under fierce legal attack during the more than two months preceding its official release date. On Friday, the US Court of Appeals for the District of Columbia Circuit rejected a Microsoft request to stay the mandate returning the case to the trial court while the Supreme Court considers whether to take an appeal.

The unanimous decision rendered by seven appellate judges means new proceedings could commence as early as Friday, with the Justice Department and 18 states expected to file new legal papers almost immediately. However, a new judge must be randomly assigned before serious activities resume in the case.

One option for the government is to seek a temporary restraining order and/or a preliminary injunction delaying Windows XP's launch. Even if the government does not try to stop Windows XP before the official release date, it could do so at a later time, said Bob Lande, an antitrust professor with University of Baltimore School of Law.

"Of course it would be easier if the government could seek an injunction before Windows XP is released, but I just don't think there's enough time," he said. "But why couldn't the government seek an injunction later, say, Dec 1?"

In an Aug 10 court filing, the government made it clear that Windows XP would be one of the topics of new court proceedings designed to craft a remedy reining in Microsoft's anti-competitive behavior. In its June 28 ruling, the Court of Appeals upheld eight separate antitrust violations against Microsoft.

Another option is settlement, but talks are unlikely to commence before a new judge is picked, said Rich Gray, a Silicon Valley-based antitrust lawyer closely watching the trial.

"What I would expect at this stage of the litigation--knowing that the case is going to be sent back down to a new judge--is that both parties would want to know who that new judge is as part of their assessment of how much they should give in settlement discussions," Gray said.

In many ways, Windows XP is the most significant operating system upgrade ever released by Microsoft. Besides bringing the consumer and commercial versions of Windows to a common code base, Windows XP offers many new features appealing at the outer edge of computing.

"There are some benefits with the videoconferencing and multimedia applications that have been added to the operating system, and consumers will pick up on that first," ARS' Duboise said.

But the slow economy has many analysts thinking Windows XP's release won't do much for fourth-quarter PC shipments.

"Given the state of the economy, it's hard to see Windows XP giving much boost to holiday PC sales," said IDC analyst Roger Kay.

PC shipments plummeted in the second quarter--down 8.1 percent in the United States, according to researcher IDC, which sees no recovery in PC sales until 2003.

Still, signs of light are appearing on the PC sales horizon, which could bring dawn with Windows XP's launch.

The Labor Department last week offered hope the economy could divert a period of inflation and even see some recovery later this year. The Consumer Price Index fell 0.3 percent in July, marking the first decline in consumer prices this year.

Higher PC sales not a given
Even so, PC sales continue to hover at record lows, down more than 20 percent year over year at retail.

"We haven't seen any significant improvement over what we would expect from a seasonal uptick--and that's a lot less than last year," said NPD Intelect analyst Stephen Baker.

"Windows XP is going to be a good driver, absolutely," Baker added. "We have a couple reasons why we think it will be good in the fourth quarter. It's going to drive traffic to the stores, and that's a lot of extra customers out there kicking the tires."

Other analysts believe the combined US$1 billion marketing campaign behind Windows XP could churn up some sales.

"If you're spending (with Intel) half a billion dollars...you're going to have some sales," said Gartner analyst Michael Silver.

"But we think the economy is the more important factor," he cautioned.

Some beta testers say they are impressed with Windows XP's handling and performance, but, more importantly, with its compatibility with existing software.

"Using Windows XP, I have not found a single piece of software that would not run either in the native XP mode or in a compatibility mode," said Clif Holcomb, a Windows XP Preview Program subscriber from Nashville, Tenn.

What could be the final version, or build, of Windows XP has some beta testers howling.

"There was some funny discussion about wouldn't it be cool if the final build for XP was 2600," said Jeffrey Patton, a Windows XP tester from Topeka, Kan. The number intrigued testers because 2600 is the name of the famous hacker quarterly and Web site.

But the joke may be Microsoft's, which jumped from build 2542 to 2600 in late testing and held to the latter number by adding decimal points to subsequent tweaked versions of the software. The most recent leaked version is 2600.0.

Microsoft could end up competing against itself, with the Xbox gaming console becoming available Nov 8, two weeks after Windows XP hits store shelves.

"You have to wonder if for many people it won't be an either-or situation," Guernsey Research analyst Chris LeTocq said.

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