Microsoft turnabout on XP follows user demands

And if customers and partners continue to press, it will capitulate again, says analyst

Microsoft Corp.'s decision today to allow low-cost desktop makers to install Windows XP Home on their hardware until June 2010 reverses a move it rejected just two months ago.

At the Computex trade show that opened today in Taipei, the company said it would allow computer manufacturers to pre-install Windows XP Home on what it called "net-tops" -- which it defined only as "low-cost desktops" -- through June 30, 2010.

Today's decision follows an early-April change in XP Home availability, when Microsoft postponed the retirement of the seven-year-old operating system by telling OEMs they could slap it on small and lightweight notebooks -- dubbed ULCPCs, for ultra-low-cost PCs -- until the end of June 2010.

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At the time of that announcement, however, Microsoft was adamant that it wouldn't consider making the same deal on low-cost desktops. In an interview with Computerworld, Kevin Kutz, Windows client director at Microsoft, said that low-cost desktops would not be eligible for the extension.

Today, a Microsoft spokeswoman explained the 180-degree turn as originating with customers and hardware partners.

"One thing Microsoft has heard loud and clear, from both customers and partners, is the desire for Windows on this new class of devices," the spokeswoman said in an e-mail. "It is important to Microsoft that they meet the needs of their partners and customers, and this is why the Windows XP Home offering is being extended to include net top devices."

That explanation seems to fit the requirements spelled out by Microsoft CEO Steve Ballmer in late April when he was asked if the company would push back the general retirement of XP from its current date of June 30, 2008. Speaking to reporters in Belgium, Ballmer said, "If customer feedback varies, we can always wake up smarter." Later, however, Microsoft said that Ballmer's comments did not indicate a shift in strategy.

One analyst today said that Microsoft's explanation made sense. "Customers and OEMS told them they needed to do this," said Michael Gartenberg, an analyst at JupiterResearch LLC and a Computerworld columnist.

But Gartenberg also said that it was more than just feedback that forced Microsoft to make the move. "For certain classes of hardware, Windows XP is actually the best fit," he said. The lower-cost components required by low-cost notebooks and low-cost desktops -- primarily their underpowered processors -- preclude using Microsoft's newer operating system, Windows Vista. "These lower-powered processors are not suitable for Vista, not now, not ever," Gartenberg argued.

Microsoft has not defined either category -- low-cost notebooks or desktops -- in more than general terms. Today, for instance, when the company was asked what would prevent OEMs from installing XP Home into more-capable machines, the spokeswoman's response was only: "Microsoft is working closely with our OEM partners to ensure they understand the specifics of this Windows XP Home offering for netbook and nettop devices."

"This kind of underscores that for many people, Windows XP is good enough," added Gartenberg, "and it shows that for now, XP, for certain classes of hardware, will be around for a while. Windows Vista has done well, but it's not perceived to have done well in the marketplace. Microsoft has had a hard time getting consumers on board Vista."

Another analyst, however, didn't see the addition of low-cost desktops to the XP extension as much of a change. "I don't find this new exception to be inconsistent with the prior exceptions, but it is evidence that anytime Microsoft sees a technology that is not ready for Vista, they could use XP," said Gartner Inc. analyst Michael Silver in an e-mail.

Gartenberg agreed. "Microsoft's been forced to extend XP with a lease on life," he said, referring to past changes in the company's XP wind-down schedule. "And if customers demand it again, Microsoft will have to capitulate again."

Even the next version of Microsoft's flagship operating system, called Windows 7 at the moment, may not be able to kill XP, said the analysts. "I'm not sure there will be anything magic in Windows 7 that will make it work better on a 512MB or 1GB PC," said Silver. "The extension of availability until Windows 7 may more likely reflect Microsoft's hope that by 2010 or so, the economics of the hardware will improve to the point where Windows 7 is viable on that class of PC."

Windows 7, which Microsoft briefly touted last week, is expected out in late 2009 or early 2010, months before the end-of-availability for XP on the low-end notebooks and desktops.

"While Microsoft needs to continue to streamline Windows to quell its appetite for more resources, how skinny they can get Windows 7 is still questionable," Silver said.

Gartenberg had other advice for Microsoft. He urged the company to take XP, overlay a Windows 7-esque user interface on it, and call it "something like Windows 7 Mobile or Windows 7 Net-top or whatever."

And the software vendor should rethink its marketing strategy, Gartenberg added. "Microsoft needs to think about ways to drive people to Vista, not force them away from XP."

In related news, Taiwanese OEM Asustek Computer Inc. used the same Computex trade show to announce that it would launch the Eee Box, a mini-desktop PC that apparently fits Microsoft's definition of a net-top. The Eee Box will come with either Windows XP or Linux and be priced between $200 and $300 in the U.S. And later this year, Asustek will unveil an iMac-like all-in-one called the Eee Monitor said the company's CEO, Jerry Shen.

Asustek is one of the major players in the low-cost notebook market, and is noted for the low-priced Eee PC.

There are now less than four weeks left before Microsoft shuts off most OEMs from selling new PCs with XP and stops shipping the old operating system to retailers.

Copyright © 2008 IDG Communications, Inc.

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