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Wednesday, October 25, 2006 - Page updated at 12:00 AM

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Discount upgrade to Vista offered

Seattle Times technology reporter

Customers who buy a new PC this holiday season will get discounts if they upgrade to new versions of Microsoft's Windows and Office software, due out in January, the company said Tuesday.

Analysts view the program as a bid to spur PC buying after Microsoft announced in March that Vista, its long-awaited update to the Windows operating system, would not be available in time for the holidays.

Microsoft said its main goal with the "Express Upgrade" program, which applies to PCs purchased beginning Thursday, is to ease consumers' transition away from Windows XP and Office 2003.

"The idea behind it is to give our customers confidence that they can have a great experience with their new PC when they buy it and an even better one when Windows Vista and Office 2007 ship," said Kevin Kutz, director of the Windows Client group at Microsoft.

Discounts will range from half off the cost of an upgrade to free. Specific terms are set by computer manufacturers and retailers, and Microsoft said it keeps its deals with manufacturers private.

Microsoft said it expects to defer $1.5 billion in revenue from the current quarter to the January-March quarter as a result of the program and "pre-shipments" of Vista and Office 2007. It expects no impact to fiscal 2007 revenues.

The announcement was made after the stock markets closed Tuesday. Microsoft shares, which were down 17 cents in regular trading, lost an additional 12 cents in extended trading to finish at $28.16 Tuesday.

The PC industry has been expecting this kind of carrot to help drive purchases. It is unlikely to change sales forecasts for the fourth quarter, which already accounted for a discount program of some kind.

Analyst's view

Microsoft had to do this, said Al Gillen, an analyst at IDC, "because if they didn't, their [computer manufacturer] partners would take a hit."

Microsoft would have suffered, too, because if companies like Dell and Hewlett-Packard don't sell hardware, Microsoft doesn't sell software, he said.

Another industry analyst was skeptical that the upgrades would prompt consumers interested in Vista to buy an XP machine, only to face installing the new operating system a few months later.

"I just don't think there's going to be a whole lot of people attracted to [it] simply because I don't know if that many people want to hassle with the upgrade process," said George Shiffler, research director at Gartner.

Some PC makers are planning to offer extra support to help with the installation process. HP, for example, will send customers driver updates along with Vista and direct them to call the company directly for support.

PC makers appear to be choosing one of two basic models for pricing the discounts: an upgrade fee for certain versions, or no added fee at all. In most cases, however, customers will be responsible for paying at least shipping and handling.

Lenovo is charging customers who buy Windows XP Home Edition PCs $45 to upgrade to Vista Home Basic and $75 to upgrade to Vista Home Premium.

Dell will also charge $45 for upgrading from XP Home Edition. Higher-end versions will upgrade to comparable versions of Vista at no added charge.

Similar programs

Consumers who purchase XP computers from Gateway get free upgrades to comparable versions of Vista. HP has a similar plan.

Microsoft will handle the upgrade program for smaller vendors of custom-made PCs, known as system builders.

In that program, buyers of Windows XP Professional, Media Center 2005, Tablet PC and 64-bit editions will get free upgrades to comparable versions of Vista. Buyers of XP Home Edition will pay $49 to upgrade to Vista Home Basic and $79 to upgrade to Premium.

Upgrades from Office 2003 to 2007, which Microsoft is handling as well, come at no additional charge.

Discounts on pre-installed copies of Windows and Office apply for purchases made through March 15, 2007. For packaged copies of Office, the discount offer ends Feb. 28.

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com

Copyright © 2006 The Seattle Times Company

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