Microsoft launches new consumer Windows program

Packed with features, but not a necessary upgrade, say analysts

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SEATTLE -- Microsoft Corp. Thursday formally launched the latest version of its Windows operating system for home users, and by stuffing the software with new music, movie and Internet features, it is echoing a strategy that has already landed it in legal hot water.

Windows Me, short for Windows Millennium Edition, is the successor to last year's Windows 98 Second Edition, but it is not a huge leap over its predecessor, analysts say.

Instead, it plugs a gap in the Windows product line until next year, when Microsoft is set to unify the business and consumer versions of its core product in a long-awaited move.

PHOTO GALLERY Click here to see visual examples of Windows Me     QUICKVOTE Do you plan to buy Windows Me? Yes No View Results     MESSAGE BOARD Operating systems     ALSO Microsoft's Maritz leaves Apple CEO unveils Mac OS X beta September 13, 2000 Review: Windows Millennium Edition July 24, 2000

"I really just see it as a placeholder, it's really not all that important," Dwight Davis, an analyst with Summit Strategies, said of Windows Me. Windows Me will be Microsoft's last operating system based on its 20-year-old DOS programming technology.

Windows 2000, the powerful corporate operating system launched in February, is based on Microsoft's NT technology, which is more stable and secure than DOS.

Originally, the company was to have scrapped DOS by now, but it faced mounting technical challenges in adapting NT to include consumer-friendly features such as video games.

"It comes out at sort of this strange time in the company's product evolution, the last gasp of the DOS line and Windows 98," Davis said.

Microsoft has scheduled a 90-minute Webcast on its site beginning at 1 p.m. EDT for a guided tour of the product. Microsoft was also hitting the road Thursday with a 25 U.S. city "Meet Me Tour" at shopping malls across the country. The tour features interactive displays where people can decide whether they want to purchase Windows Me.

According to Microsoft, the retail price for Windows Me will be the same as Windows 98 at $209 for the full-package and $109 for a version upgrade from Windows 95. But for a limited time -- until January 15, 2001 -- Windows 98 and Windows 98 Second Edition users can also upgrade for $59, after which time the $109 price prevails.

Denny Arar, senior editor at PC World magazine, said that Me runs too slow and offers consumers too little to justify its price tag.

"I would say it's definitely not a must-get upgrade, and I think it has been relatively low-profile launch for a reason," Arar said. "Many of the new features are available as standalone products -- free downloads."

Windows Me does add new programs, such as a music player that can record, store and play songs.

Also included are tools for editing home movies, built-in support for home networking, and a "system restore" feature that returns the PC to an earlier state if it crashes.

"It's designed solely with the home user in mind," John Frederiksen, general manager of Microsoft PC Experience Group that oversees PC versions of Windows, said in an interview.

As digital music players, digital cameras and other such gadgets catch on, Microsoft wants to make the PC act as a hub for other kinds of computing activities, Frederiksen said.

"Overall, these new devices are really adding to the value of the Windows PC and allowing the PC to be a great creativity center," Frederiksen said.

Microsoft also says 28 percent of U.S. households now have two or more computers, and the company believes most of those families are looking for an easy way to tie their PCs together.

"We've made that simple and easy with Windows Me by adding wizards that set up your home network for you," Frederiksen added.

The media player takes clear aim at Microsoft's cross-town rival, RealNetworks Inc., which makes some of the most popular media software and helped pioneer the market for audio and video on the Internet.

"Interestingly, it sort of raises some of the issues about Microsoft bundling features into the operating system, which of course has been core to the whole antitrust issue," said Davis of Summit Strategies.

In June, a federal judge found Microsoft guilty of breaking antitrust law by using its monopoly in Windows to try to crush rival Netscape, which made software for browsing the Internet. Microsoft started bundling its own browser in with Windows.

Microsoft says it did nothing wrong and is appealing the ruling, which would split the company in two. The Supreme Court is expected to decide soon whether to hear the appeal directly or let a lower appeals court take it first.

"To bundle in (more software) looks to me like a very risky thing to do. They seem to want to get audio and video players into the operating system before they get to the Supreme Court in case the court orders them not to," said Brian Livingston, author of the book "Windows Me Secrets."

Even if current Windows 98 users don't shell out the money being charged for an upgrade, Windows Me is still expected to do well since most PC makers will include it with almost all new computers going out their doors.

With consumer confidence still buoyant in a strong economy, Microsoft could sell 100 million copies of Windows Me over the next year and half, Livingston projects.

"This kind of penetration is what Microsoft sees as far more important than people buying it as upgrades in the store," Livingston said.

Many people, however, are expected to hold out until the NT-based consumer Windows, being developed under the code-name "Whistler," become available.

Whistler will also weave in the first threads of Microsoft's new ".NET" strategy to retool its entire product line for the Internet and start delivering software as a subscription service rather than in shrink-wrapped boxes.

Whistler will make it easier for users to swap data between devices and will blur the line between using a PC and using the Internet, Frederiksen said.

"The online experience is changing from one of passive, where you go to the Web, to more active, where you program your Web sites," Frederiksen said. But for now, Microsoft is pumping the Me generation.

"Our message is that Windows Me is a timely upgrade," Frederiksen said. "Our focus between now and the end of year is really about communicating the great products that are available today."

Reuters contributed to this report.

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Microsoft
  • Windows Me
Summit Strategies
RealNetworks.com

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