Customers could spur interim Windows XP version

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Microsoft Corp. will slip out an interim desktop version of its Windows operating system before 2004 under pressure from some customers who signed up for its new enterprise licensing plan, several analysts predict.

Microsoft's current roadmap calls for the next release of Windows for the desktop to appear in the second half of 2004, officials say. That release is code-named Longhorn, and Microsoft has promised to pack a number of new technologies into the operating system that coincide with its Web-based .Net initiative.

However, industry watchers say that Microsoft is poised to miss the deadline for Longhorn, which would leave customers that signed up for its new annuity licensing plan, known as Software Assurance, paying for a product that they may not receive. Those contracts, which last three years, require customers pay an annual fee each year during the life of the contract for access to bug fixes, or new operating system releases.

"If people sign up for Software Assurance and no new (desktop) versions of Windows are made available during the three-year period, there could be some customers that pay but get no value out of it," said Alvin Park, research director for Gartner Inc.

Customers that purchase Windows under Microsoft's Enterprise Licensing Agreement or through other Software Assurance plans pay 29 percent of the cost of Windows on the desktop and 25 percent of Windows for the server each year during the life of the contract. If a customer purchased Windows through Software Assurance in late October 2001, when Windows XP was released, they would be eligible for an upgrade through October 2004.

Microsoft offered customers a discount if they purchased Windows under the new license by July 31 of this year, and Park estimated that at least 35 percent of Microsoft's enterprise customers took advantage of that deal.

At least two analysts say that Longhorn won't actually reach customers until the second half of 2005, and as a result will force Microsoft to release an interim product that it can deliver to Software Assurance customers whose contracts expire before then.

"There's really no doubt about it," said Tom Bittman, vice president and research director with Gartner.

Rob Enderle, research fellow with Giga Information Group Inc., said that "there's every likelihood" that Longhorn won't meet Microsoft's late-2004 deadline. The company is working to add more security to the software and is spending more time analyzing code, which is slowing down the process of shipping new code to customers, he noted.

"If nothing comes out on the desktop during the life of the contract, customers are going to be pretty miffed because they would have bought something that never shipped," Enderle said. "That absolutely could put pressure on Microsoft (to release an interim version)."

A Microsoft spokesman was firm that it wouldn't ship a desktop Windows product that wasn't already on its roadmap. "There's no plan for anything to come out before the next version of Windows, which is Longhorn," said Jim Cullinan, group product manager with Microsoft's Windows division.

Microsoft has a history of delaying Windows releases. The Windows .Net Server 2003 was originally scheduled to ship about six months after Windows XP, which would have put it on the market in May of this year. Microsoft has twice moved back that date and now expects to ship the product to manufacturers before the end of the year, which would set it up to reach most customers in early 2003.

Additionally, Microsoft had promoted a desktop version of Windows, code-named Blackcomb, as the successor to Windows XP. That release has since been replaced by Longhorn and pushed out a few years, company executives say.

Other factors could pressure Microsoft to release a desktop Windows upgrade in the next year or two before Longhorn reaches customers. Enderle noted that Microsoft typically readies a release of Windows to coincide with updates to its Office software. Microsoft plans to release Office 11 next year.

"New versions of Office don't move particularly well unless there is a new operating system," Enderle said.

Additionally, OEMs typically pressure Microsoft to release new software either for the holiday shopping season or for the back-to-school rush, according to Bittman.

An interim release would probably mirror Microsoft's strategy with the release of Windows 98 Second Edition, according to the two analysts. That would mean a successor to Windows XP would include security updates and some feature enhancements, such as new media player software. A second release of Windows XP could also include enhancements that bring the operating system up to date with the next release of Microsoft's SQL Server database, code-named "Yukon," Enderle said.

While Microsoft held strong to its statement that Longhorn would be its next release and would come out in late 2004, Bittman questioned the company's intentions: "Perhaps Microsoft has to be careful to say there will be another release coming in less than three years in order to drive license sales," he said.

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