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Microsoft cuts Win ME prices
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August 1, 2000: 3:43 p.m. ET
New operating system promotion targets users of Windows 98
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NEW YORK (CNNfn) - Microsoft on Tuesday announced plans to roll out Windows Millennium or ME, the newest version of its operating system, in September at discounted prices.
The promotion targets users of its older operating system, Windows 98, in the hope that they will upgrade to ME and its enhancements that include PC digital health, digital media, home networking and Internet capabilities.
Microsoft also announced Tuesday its first efforts in a global campaign to combat Internet fraud involving the sale of software products. Employing new technology and working with industry partners and law enforcement agencies, Microsoft has taken legal action against more than 7,500 Internet Web and auction site postings allegedly offering counterfeit and other illegal copies of software. The illegal content resided on Internet servers located in 33 countries on six continents.
Beginning Sept. 14, ME -- as an upgrade version of Windows 98 and Windows 98 Second Edition -- will be priced at $59.95. The full package alone will retail for $209 and the upgrade version for Windows 95 users will sell for $109.
 New features aimed at home users include system file protection, a home-movie maker, a Windows Media player and an Internet Explorer 5.5 browser.
Software analysts said Microsoft's unprecedented move at slashing prices ahead of a software release may be prompted by home PC users who are slow to upgrade.
"What Microsoft is seeing is the proportion of their base that upgrades is not as high as it used to be," said Chris Le Tocq, research director at Gartner Group. "For a lot of people today, they buy their PC, they plug it in, it gives them access to the Internet and that's what they bought it for."
Le Tocq said most PC users don't necessarily feel they need a new operating system and are perfectly content with what they have. These users view PCs more as appliances, as opposed to previous PC users, who were hobbyists and were more immersed in computer technology.
However, a larger problem for the Redmond, Wash.-based Microsoft (MSFT: Research, Estimates) is that each time it releases an upgraded software product it competes with its older version. New products may have some more bells and whistles, but it appears that these roll outs go head-to-head with older Microsoft products.
"If you look at what the opportunity is for Microsoft, it's that it just starts to sell one thing instead of another -- it's not an increase for them," Le Tocq said. "The revenue opportunity of the release of a consumer operating system is related to how much of the installed base you can get to upgrade by taking the new product and putting it over what they used to have."
When Windows 2000 for consumers or Microsoft's Whistler project as it's known, gets launched around the end of 2001, then the company will face the same challenge -- trying to persuade its customers that they need the new software.
"Microsoft has been relatively less able over time, to persuade their installed base to make the switch. People are just happy with what they have already," Le Tocq said.
Shares of Microsoft were trading Tuesday afternoon at 68-7/16, down 1-3/8. 
- from staff and wire reports
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