Tuesday, January 30, 2007

The Wait for Microsoft Vista And The Marketing Barrage

Microsoft’s power in the technology industry, some analysts insist, is waning. It faces a host of rivals from a reinvigorated Apple on the desktop to Web-based challengers like Google, delivering services and software online.

But yesterday, on the eve of the arrival of new models of Microsoft’s flagship products, the Windows operating system and the Office programs, the skeptics were overshadowed and drowned out by the opening salvos in the software giant’s marketing campaign.

Windows Vista and Office 2007 start appearing today, available in retail stores as a shrink-wrapped package and shipped on new machines sold by personal computer makers. The new Microsoft offerings were available to large corporate customers at the end of November.

Steven A. Ballmer, the company’s chief executive, called today “the biggest product launch in Microsoft’s history,” and the rollout will be backed by a first-year marketing budget of hundreds of millions of dollars.

New versions of Windows and Office move across the technology industry like a powerful weather system, driving sales of personal computers and other hardware, software and services. The pace is typically gradual but steady, yet the impact on the rest of the industry is significant.

Over 5,000 software and hardware products are ready to run on Vista, and Microsoft has more than 500,000 industry partners worldwide, including resellers, retailers and consultants as well as hardware and software companies. Millions of developers write programs that run on Windows.

For every dollar Microsoft makes on Windows Vista, the rest of the industry will collect $18 of revenue, estimates IDC, a technology research firm. Indeed, those that build products and services on top of and around Microsoft’s technology constitute an industry ecosystem that business professors have studied. And Microsoft’s long investment in nurturing that network of mutual support, they say, is a major reason that Windows holds more than 90 percent of the market for PC operating systems.

In the United States, the IDC report concluded, “this ecosystem should sell about $70 billion in products and services revolving around Windows Vista” in 2007. The introduction of Windows Vista, IDC projected, is expected to generate 157,000 jobs in the United States. The IDC study was paid for by Microsoft, but the research firm said it used its own methodology.

Because the universe of Windows users has grown, Mr. Ballmer predicted that sales of Windows Vista in the first three months would be five times the early sales of Windows 95, introduced in 1995, and double the sales of Windows XP, shipped in 2001.

Mr. Ballmer spoke at a news conference in New York, along with executives from large computer manufacturers and chip makers. “I hope your forecasts are right,” said Todd Bradley, executive vice president for personal computers at Hewlett-Packard. “We’d all be thrilled.”

The industry has certainly been patient. Vista suffered repeated delays, coming five years after Windows XP. Microsoft has vowed that there will never again be so lengthy a gap between versions of its operating system. Industry analysts expect that Microsoft will more regularly update Windows with new features and bug fixes delivered over the Internet — and that the line between the desktop software and Internet software will increasingly blur.

“Today will go down in computing history as the last big operating system launch for Microsoft,” said Gary Beach, publisher of CIO Magazine, a publication for professional technology managers.

For those upgrading from previous versions of Windows, there are three versions of Vista, from $100 to $260. The new operating system has striking three-dimensional graphics, an easier-to-use interface and improved security, and it handles games, music, video and pictures far better than previous generations of Windows, most product reviewers have agreed. But many reviewers have also pointed out that most of the new features in Vista are already in Apple’s Macintosh computers.

Mr. Ballmer and Bill Gates, the chairman, presided over a gathering in a Times Square theater to celebrate Vista’s arrival, along with industry partners, analysts, and early Vista users, or beta testers. One was Farage Yusupov, a lawyer at Paul, Weiss, Rifkind, Wharton & Garrison. Some Vista features, he said, did not run on his two-year-old laptop.

But Mr. Yusupov said he planned to get a new computer with Vista soon. “In a year or two, every computer is going to have it,” he said. “Since I’m going to get it sooner or later, I want it sooner.”

Microsoft’s industry partners described Vista as a watershed. Hector Ruiz, the chairman of Advanced Micro Devices, a microprocessor maker, said the new Microsoft operating system would usher in “the visualization age of computing” with rich 3-D graphics entering the mainstream. “And stunning visual experiences require outstanding hardware,” Mr. Ruiz added.

Kevin B. Rollins, Dell’s chief executive, said his company began taking orders online over the weekend for Vista-equipped machines. Traffic on the company’s Web site increased 20 percent because of demand for PC’s running Vista, and tens of thousands of them have been sold in the last couple of days, Mr. Rollins said.

Sean Maloney, executive vice president of Intel, said that Vista’s abilities combined with rapidly advancing technology in microchips would lead to a “golden age for PCs,” allowing them to serve as a central hub for storing, managing and sending digital media like movies and music to television sets and music players in the home.

In an interview, Mr. Bradley of Hewlett-Packard pointed to his company’s TouchSmart PC, being released to coincide with Vista’s debut, to show that manufacturers are increasingly able to use Microsoft’s operating system as “a platform we can build around instead of just embed on our machines.”

The $1,699 model, with a 20-inch touch screen and television tuner built in, has a user interface that has been tailored by Hewlett-Packard engineers so that it looks different from a standard Windows machine. Microsoft’s antitrust settlement with the federal government required the software maker to give PC makers more freedom to modify Windows.

Most of Microsoft’s vast marketing budget will be on print, television, radio and Web advertisements. But some will go for so-called viral marketing events like an online puzzle contest called Vanishing Point, sponsored by Microsoft and A.M.D. The winner will get a ride into space from a private space travel company.

The strategy, said Michael Sievert, vice president for Windows marketing, “is really about getting people to come in and have a look.”


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