Originally created 05/15/98

Windows 98 delay could send computer makers scrambling

NEW YORK -- Hewlett-Packard Co. technicians had planned to work this weekend to test the new Microsoft computer software they expected to receive on Friday.

But with Microsoft Corp. delaying shipment of its Windows 98 program to Monday, the staff at Hewlett-Packard instead may have to work overtime next week to get tests and production for the computer operating system back on schedule, an industry source said Thursday.

Hewlett-Packard isn't the only computer maker that will have to scramble to make up for lost time because of Microsoft's three-day delay in its shipments to manufacturers.

Moreover, manufacturers could have problems delivering Windows 98 computers to retailers on June 25, as scheduled, if a delay drags on for more than a week, industry analysts said.

The concern was triggered by Microsoft's announcement Thursday that it would delay shipping the upgrade of its popular Windows software so negotiations with the government can continue. The move is part of Microsoft's last-minute effort to avert antitrust lawsuits by the Justice Department and 20 states.

Major computer makers said the three-day delay is too brief to push back their plans to start selling Windows 98 machines to consumers on June 25. They need the six weeks to test the software and prepare factories for downloading it onto the new PCs. Indeed, companies already have extensively tested earlier versions of Windows 98.

"I would say Monday we're still OK, but as it starts pushing out later than that the pressure becomes greater," said Anne McGrath, a spokeswoman for Palo Alto, Calif.-based Hewlett-Packard.

If problems are found in the software, the PC maker may need to send back part of the software code to Microsoft and other vendors to fix.

Spokespeople for Dell, IBM and Compaq said they expect to make the June 25 public release. Analysts said Dell and Gateway, another PC maker, may have fewer problems because they sell their machines directly to customers and are used to changing their factory processes to custom-build machines.

Still, "Anything that's more than a week is going to have an impact" for some big PC makers, said Dave Tremblay, an industry analyst with ZD Market Intelligence, a San Diego-based high-tech research firm.

While consumers haven't been holding their breath for Windows 98 -- considered a relatively minor update to the Windows program -- missing the date could cause headaches for PC makers.

Computer makers are anxiously eyeing June 25 because they don't want their Windows 98 machines to get into retail stores behind rivals' computers, losing sales to competitors.

Major computer-store chains say they've planned millions of dollars of advertising to push the new software, which analysts expect to give a slight lift to computer sales.

The Justice Department and the states had planned to file antitrust lawsuits Thursday in U.S. District Court in Washington, D.C., contending that Microsoft has wielded its monopoly status to illegally crimp competition, especially in the market for Internet browsers, the software that people use to view information on the World Wide Web.

Microsoft has not said what concessions it is offering government officials in exchange for an agreement against filing antitrust action.

But Microsoft's delay of only three days led some industry experts to believe that the company is offering to remove its Internet browser icon from view on the Windows 98 desktop screen.

That change could be done simply within that short time, said Tim Bajarin, president of Creative Strategies Research International, a San Jose, Calif.-based high-tech consulting firm.

Any more drastic change, such as removing computer code from its operating software, would take far longer, he said. Microsoft has insisted that it has not begun to alter its operating system in preparation for concessions to the government.

Microsoft could offer other concessions as well, but these would involve modifications to business contracts and not to the Windows technology. One possible change, for example, would enable rivals to more easily get their software and services featured in the Windows operating system.


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