Aug 22, 9:15 PM EDT

Microsoft Considers Discounts for Vista

By ELIZABETH M. GILLESPIE
AP Business Writer

SEATTLE (AP) -- Microsoft Corp. is considering discounts or other promotions during the holidays to entice consumers to upgrade their PCs with Windows Vista, even though the new operating system isn't due to hit store shelves until January at the earliest.

Any end-of-the-year effort to spur PC purchases would likely please many retailers and computer manufacturers, who fear disappointing sales during the crucial holiday as consumers wait for the highly anticipated and long-delayed software.

Kevin Kutz, a director in Microsoft's Windows Client Group, confirmed Tuesday that the company is in talks with PC makers and retailers about a range of possible holiday promotions. But he declined to offer other details, such as whether they would apply only to new purchases.

Vista will be the first major upgrade to Microsoft's flagship operating system since Windows XP was released in 2001. After a series of delays, Microsoft said it appears to be on track to ship the business version of Vista in November and to consumers in January.

Last month, however, Kevin Johnson, co-president of the Microsoft division that includes Windows, said the company would not hesitate to delay Vista again if it has any concerns about product quality.

George Shiffler, research director at Gartner Group, revised his PC sales forecast for 2006 after Microsoft announced its latest Vista delay in March. He said he expects about 1.1 million fewer units to be sold worldwide than previously forecast.

Shiffler isn't expecting Microsoft to make the January release date. He notes that it usually takes Microsoft nine months to a year to ship the final product after its second "beta," or test, release. Vista Beta 2 came out in May.

He suggested some PC makers might be hoping for another delay, because marketing an operating system that doesn't exist yet is a formidable challenge they'd rather skip.

Instead, he thinks they'd rather wait for holiday and Super Bowl media distractions to end before trying to get customers excited about a new PC.

Microsoft's initial goal for the consumer market "was to get Vista-powered machines, new chips, Intel processors - have the whole thing come together in time for Christmas," said Ted Schadler, an industry analyst for Forrester Research Inc.

Stephen Baker, vice president of industry analysis for NPD Group questioned whether any Vista promotion would work before consumers can actually buy it.

"The issue isn't that people don't want to buy a new PC ahead of a new operating system," Baker said. "People don't want to install a new operating system on a new PC."