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Microsoft Vista delay seen hurting consumer PC cos

Written by: Staff
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SAN FRANCISCO, Mar 22 (Reuters) Microsoft Corp.'s decision to delay the release of its consumer Vista operating system is expected to hurt computer makers including Dell Inc. that had hoped Vista would rev up sales late this year.

Shares of top PC maker Dell and No. 2 Hewlett-Packard Co. fell about 2 percent after Microsoft announced the delay, while Microsoft's archrival Apple Computer Inc., which has its own computer operating system, added 1 percent.

Microsoft of Redmond, Washington, the world's biggest software maker, said after the close of regular trade on Tuesday that it planned to delay the consumer launch of its much-anticipated Vista operating system to January 2007 from its earlier target of the second half of 2006. Microsoft plans to launch a corporate version in November.

Now, consumers are likely to wait until the new operating system is available before buying new computers, said Shaw Wu, an analyst at American Technology Research Inc. in San Francisco who has a ''buy'' rating on Dell stock and a ''hold'' on HP.

''It makes the second half more difficult now'' for PC makers, Wu said. ''There's less of a driver for sales.'' Round Rock, Texas-based Dell, which disappointed investors last year with slower-than-forecast growth, has said it expected Vista to help boost its sales toward the end of this year.

''Toward the end of the year, sales will revive with the release of the new Windows Vista operating system,'' Dell European senior vice-president Paul Bell told Germany's Frankfurter Allgemeine Zeitung last month, referring to European sales. Dell Chief Executive Kevin Rollins made similar remarks at an investor conference on March 1.

Spokespeople for the major PC makers said they would be ready when Microsoft was.

Dell spokesman Jess Blackburn said, ''We remain ready and excited to offer Vista when it is available.'' David Hallisey, spokesman for Gateway, said, ''This allows us to prepare for the holidays in a more orderly fashion, and regardless of the actual timing, our PCs will be fully Vista-ready well in advance of Microsoft's introduction.'' Palo Alto, California-based HP supported the change. ''Microsoft has been, and remains, one of HP's most valued and trusted partners, and we support them in determining the most appropriate schedule for its Windows Vista launch.'' The company said it delayed the consumer version to improve quality, especially security. It also said PC makers didn't want the operating system introduced in the middle of holiday sales as a new version would create instability in the market.

Consumer PCs make up about 15 percent of Dell's sales. The bulk of its revenue comes from corporate sales, which won't be affected by the delay in launching the Vista consumer system.

Jim Allchin, co-president of Microsoft's platforms and services division, said he believes PC manufacturers and retailers will offer upgrades to Vista during the holiday buying season, traditionally the busiest for PC makers.

Microsoft, which has not overhauled the consumer version of Windows in over four years, had originally been expected to release Windows Longhorn, now Vista, in 2005. The company scaled back its ambitions and pushed the launch out to 2006.

Dell stock fell 1.6 percent in after-hours trade on Tuesday. It had gained 1.7 percent in regular trade on Nasdaq.

Stock of HP dropped 1.7 percent and those of Irvine, California-based Gateway Inc., the third-largest U.S. personal computer maker, slipped 0.4 percent in after-hours trade on Inet after gaining in regular trade.

REUTERS PR PM1021

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