Will Windows 7 Be a PC Mover?

No two recessions are the same, and the shakedown hitting the U.S., indeed the global economy, is very different from the one experienced in 2000-2002. That was a powerful combination of the Silicon Valley getting hit directly from the dot-bomb implosion and the overall U.S. economy shattered by the events on September 11, 2001.

This time, the industries hardest hit are banking and housing, and tech has merely been caught in the blast radius. The lack of credit, draconian decisions by credit card issuers and uncertainty about jobs has people keeping their wallets closed and limiting purchases to the essentials.

Vendors are trying their best to get product moving. The PC sector has taken to cutting prices as much as it can without actually losing money. However, customers are still not motivated. PC sales fell to just 1.1 percent year-over-year growth in the fourth quarter.

So, can the release of Windows 7 get PC sales moving again? Even in prerelease form, Windows 7 has done something remarkable; it’s generated real, positive excitement on the blogosphere and Web sites for its stability and performance. There is also some anecdotal evidence that lots of people are willing to buy a Windows 7 machine when it debuts.

The clearest statement came this week from Brian Gladden, chief financial officer of Dell (NASDAQ: DELL), on a conference call with analysts to discuss the firm’s fourth quarter and fiscal year.

“We’re starting to get pretty excited about Windows 7 and think it will be an important catalyst for growth,” he told analysts on the call.

Then Gladden said the one thing Microsoft probably doesn’t want to hear: “Having said that, it will likely push some purchases back until it comes out.”

Analysts interviewed by InternetNews.com are cautiously optimistic the release of Windows 7 can help drive PC sales. The questionable economic situation is a black cloud in everyone’s crystal ball, forcing all of them to temper their sentiments.

These sentiments were also impacted by the fact that Microsoft still has not given a release date for Windows 7. It continues to maintain the party line of a January 2010 release date. InternetNews.com has learned otherwise — that the company internally has set a target date of June 2009. Judging by the solid condition of the beta and numerous accolades heaped on it, that June target seems increasingly likely.

Next page: Outlook: cloudy

Page 2 of 3

Outlook: cloudy

The general forecast for Windows 7 looks good. With many consumers and businesses holding off on purchasing new computers because they didn’t want Vista, that means there are a lot of aging computers that need to be put out to pasture.

“The big benefit is if they can get Windows 7 done by the holidays, it’s another reason to get consumers to buy,” said Stephen Baker, vice president of research for NPD Group. “In this environment, that’s what everybody needs, a reason to get people back into the marketplace.”

Added Rob Enderle, principal analyst with The Enderle Group, “There is a lot of aging hardware in the market, particularly in the large business space which is waiting for a trigger. Windows 7 could be that trigger and feedback from companies is that they are optimistically looking forward to driving deployments with it.”

Predictions are clouded by the economy, not to mention guessing when Windows 7 will really ship. “It’s not the sort of answer I could say ‘yes’ or ‘no’ to,” said Richard Shim, research manager for IDC’s Personal Computing program. “There are significant variables and right now we don’t have definitive visibility to say [Windows 7’s impact].”

Steve Kleynhans, vice president in the Client Platforms Group at Gartner, was probably the most bearish on the consumer impact. “It is unlikely that an OS on its own won’t outweigh consumer concerns about the economy, so we aren’t expecting it to have a major impact this year,” he said in an e-mail to InternetNews.com.

Baker also has two cautionary points: the first is that despite the great buzz for Windows 7 on the Internet, the vast majority of consumers have much bigger concerns right now. “This is not on their radar today. Come the end of the year, if this is available, we’ll have something to talk about,” he said.

Should I stay or should I go?

On the business side, Vista has gotten a big thumbs down, with many companies choosing to wait, or forcing Microsoft to keep extending the availability of Windows XP as a purchase option. But the Vista distaste has given way to economic realities.

“The reality is that the economic situation is causing a lot of companies (both small and large) to slow down their PC replacements and postpone non-essential projects. This is likely to impact corporate Vista deployments significantly – in a negative way,” Kleynhans said.

However, Microsoft plans to end support for Windows XP on April 2014, so companies will start to feel some pressure to start migrating their computers from XP to something else and be finished by the middle of 2013.

That would be cutting it close for companies that eschew Vista, which almost half said they would do in one survey. Windows 7 deployments won’t start until 2011 because it takes at least a year to get all the pieces lined up, get apps tested, get support from third parties, and so on, said Kleynhans.

Next page: Transition issues

Page 3 of 3

Transition issues

“This means that a lot of companies will be looking at doing an update either to Vista or Windows 7 in the rather narrow window between 2011 and mid-2013. Given that many of these same companies will find the average age of their PC fleet will have grown by 2011, there will be pressure to update a lot more machines as part of a migration during the 2011-2013 period,” he said.

Microsoft is certainly not encouraging anyone to wait.

“We recommend they deploy Windows Vista to both take advantage of its benefits and to get their applications ready for Windows 7,” said a Microsoft spokesperson in a statement e-mailed to InternetNews.com.

Because Windows 7 will not make significant architectural changes over Windows Vista, using the same kernel and device driver model, Microsoft expects that Windows 7 will run most if not all applications that run on Windows Vista.

“While we know that enterprise customers will want to complete thorough compatibility testing with any new operating system, the transition to Windows 7 should be much more straightforward if they move to Windows Vista in the interim,” the company concluded.

Shim believes there will be some corporate buying for Windows 7, and they won’t wait for the first service pack to be released, which is usually what happens. In the past, businesses would test a new OS, but not distribute it until the first service pack came out, usually one year after the OS is released.

“The short time frame between Vista and Windows 7 has given commercial buyers a reason to hold off,” he said. “That as well as the economy, and we haven’t seen a refresh cycle in a while. My feeling is adoption for Windows 7 will be pretty quick, because a lot of what they tried to accomplish with Vista will be in 7.”

News Around the Web