Microsoft offers discount for Vista upgrade

It wants to appease PC vendors after missing deadlines for new OS, analyst says

 In an effort to mollify hardware vendors worried that delays in the launch of Windows Vista will dampen holiday PC sales, Microsoft Corp. is offering a discount to consumers and small businesses that want to upgrade from Windows XP to the new operating system.

Microsoft will offer the upgrade coupon to shoppers who buy a Vista-capable PC between Thursday and March 15 and will allow them to redeem the coupons for a free or discounted upgrade from Windows XP to Windows Vista and from Office 2003 to Office 2007.

After a series of delays, Microsoft expects to ship the Vista operating system early in 2007. The product offers features like translucent desktop windows, improved performance of digital music and photography, and data backup for business users. But those features come at the cost of greatly increased demands on hardware performance. A Vista-ready PC must have at least 512MB of memory and an advanced processor and graphics card.

PC vendors and component manufacturers stand to profit from the boost in demand for those parts, but they have grown increasingly nervous about missing the holiday sales season, given that Microsoft has bypassed several deadlines for shipping the new operating system, analysts say.

"I definitely see it as a move by Microsoft to appease PC vendors and key component manufacturers such as Intel. Microsoft has very little goodwill left with the vendors, having disappointed them several times with Windows Vista delays," said Martin Kariithi, a hardware analyst at Technology Business Research Inc. in Hampton, N.H.

This is a smart way to achieve that goal, since Microsoft will probably incur only a small charge to maintain the coupon program, and  will not lose much potential profit compared to the full Vista sales price, he said.

Also, Microsoft will share the costs of the upgrade program with vendors such as Hewlett-Packard Co., which has an interest in giving consumers enough confidence to buy PCs now instead of later.

"We do believe that the Vista Express Upgrade program will help early adopter customers who prefer to upgrade to Windows Vista but would also like to take advantage of the myriad promotions and discounts typically offered during the holiday period," HP spokeswoman Tiffany Smith said in an e-mail.

The exact cost of the upgrade will vary among PC vendors, but HP will offer its new North American customers a choice of a free upgrade from Windows XP Home to Windows Vista Home Basic, from XP Media Center Edition 2005 to Vista Home Premium, or from XP Professional to Vista Business. The offer applies to those who buy an HP Pavilion or Compaq Presario desktop or notebook PC or an HP Digital Entertainment Center, if it includes a qualified XP system, is Vista-capable and is purchased within the coupon dates.

Other vendors may charge "a nominal fee" to upgrade from Windows XP Professional, XP Tablet PC Edition or XP Professional x64 Edition to Windows Vista Business or Vista Business 64, Microsoft said. More information is available on the Microsoft Vista Web site.

Copyright © 2006 IDG Communications, Inc.

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