Microsoft Entertains New Strategy

Microsoft’s bid to demolish the wall dividing home office and living room began in earnest today, with an operating system refresh and new PC partners.

Windows XP Media Center, which debuted last year, targets users who want desktop OS standbys, plus digital TV, personal video recorder, music, photo and video content tools.

But the new version is about more than persuading users to stick with Microsoft when it’s time to buy a new PC.

By staking out territory along the blurring border of PCs and consumer electronics, Microsoft is trying to force the issue and give consumers a reason (besides faster processor speeds and additional memory) to buy now.

To promote the relaunch, and the concept of the PC as the brain of the entertainment center, Microsoft hosted splashy presentations in New York, Redmond, Wash., and San Francisco.

“We’re moving from geek to sleek with the best marriage of software, hardware and services,” said Jim Allchin, vice president of Microsoft’s platforms group.

Allchin said the Media Center upgrade was part of the push towards “experience computing.” The Media Center Edition 2004 also adds a services feature that allows users to purchase content from partners like Napster, MovieLink and CinemaNow.

Microsoft’s success depends on its allies’ ability to design compelling PCs and complementary hardware, software and networking connections. The companies, maligned in recent years for stale designs, went back to the CAD screens to create machines lending themselves to video, photos and music. At the same time, they were mindful that the computers would not be stuffed relegated to home offices in dark attics and dank basements.

For example, Poway, Calif.-based Gateway introduced its 610 Media Center that combines a 17-inch widescreen flat display, personal video recorder PVR, FM/TV tuner, stereo with built-in speakers and DVD player.

A Gateway spokesperson wasn’t content to restrict the computer to the living room, saying it would work well in the office, den, bedroom, kitchen, dorm or studio apartment. Gateway’s new Media Center comes in three configurations selling between $1,500 and $2,000. It will ship next month and be one of four Media Center models.

Microsoft said Dell and Sony (a potential rival given its consumer electronics and computing platforms) will deliver Media Center PCs, joining Gateway and other existing manufacturers, HP and Toshiba. Most manufacturers have at least one model priced around $1,000, which should help spur adoption.

Avi Greengart, a senior analyst with Jupiter Research (which is owned by the same company as this Web site), said Dell and Sony’s presence confirms the view that consumers are ready to accept the PC as a home entertainment hub.

Likewise, visual processor maker Nvidia , heralded a product suite for Media Center PCs, to power a variety of multimedia applications including TV recording, DVD playback and 3D gaming, among others.

And because content is key to the Media Center, Microsoft struck deals with digital content providers, including CinemaNow, Movielink and Napster. Others, such as MSN TV service, bring gaming, news, DVD creation and other features.

Some analysts have high expectations for Media Center. Jupiter Research (whose parent company publishes this Web site) today predicted that Media Center will become the standard OS for mid-level PCs and some desktop replacement notebooks, over the next year to 18 months.

* Ryan Naraine contributed to this report.

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