Foley on Microsoft

XP: The OS that Won't Die

That's good news for users, but not necessarily for Microsoft.

Reports of Windows XP's death -- which Microsoft has been giving us for the past few years -- have been greatly exaggerated.

Sales of XP are still going like gangbusters on netbooks. Microsoft is going to provide Windows 7 users with downgrade rights for XP. And most tellingly, Microsoft recently gave its 8-year-old operating system another lease on life via a new Windows 7 add-on that it's calling XP Mode.

Microsoft isn't characterizing XP Mode as another XP life-extender, but that's what it is. It's not just a backward-compatibility tool. It's a full, licensed copy of XP Service Pack 3, and, as such, provides users with yet another reason not to retire XP or old XP applications.

To Microsoft's credit, the company is refraining from pulling the plug on XP outright. Even though Redmond is trying to wean customers from the OS-by phasing out free support in April, for example-Microsoft still offers XP because many of its customers still want and need it.

But what's good for users isn't necessarily good for Microsoft, as we've seen in the financial results from the company's last two quarters. Redmond's Windows Client business, which traditionally has been one of the biggest moneymakers for the company, is hurting. Its decline in profits can be attributed in part to lower PC sales, which are the result of the ongoing economic downturn. But the drop in profits is also the direct result of consumers and PC makers favoring lower-cost Windows SKUs.

Microsoft has saturated the desktop OS market with Windows in the developed world. To continue to grow revenues, the company has put a lot of emphasis on finding ways to entice its customers to buy higher-priced premium Windows versions. It has done this by holding out some of its best features for inclusion in Windows' Professional, Business, Enterprise and Ultimate SKUs. That ploy, however, no longer seems to be working.

On netbooks (which Microsoft said accounted for 10 percent of total Windows PCs sold in the first three months of 2009) XP is what has allowed Windows to squeeze out Linux. Microsoft loves to claim to have 90-plus percent of the netbook market. The margins there, though, aren't so loveable, with PC makers thought to be paying the 'Softies $15 a copy for XP on netbooks, compared to an estimated $75 or more per copy of Windows Vista on new PCs. Microsoft hasn't revealed its final plans for OEM or retail pricing for Windows 7, but it's going to have to go pretty low on Starter Edition and Home Premium to persuade PC makers and customers to stick with Windows over Linux on new netbooks.

Perhaps more quickly than Microsoft officials expected, the company's Windows team has found itself facing the same problem that has been plaguing the Office group for the last few years: Office's biggest competitor is older versions of Office. Similarly, Windows 7's biggest competitor is going to be XP-not Mac OS, Linux (sorry, fanboys) or even Vista.

XP ended up being too good for Microsoft's own good. It's more than adequate for the majority of PC users. In spite of all Microsoft's warnings about XP's less-than-ideal security levels and in spite of all the company's claims about Windows 7's vastly superior ease of use, reliability and performance, XP still works just fine for me. Microsoft, you're going to have to pry XP from my cold, dead hands ... unless my trusty ThinkPad chokes before that, which, based on my previous notebook history, it likely will.

Is XP more than good enough for you? Why or why not?

About the Author

Mary Jo Foley is editor of the ZDNet "All About Microsoft" blog and has been covering Microsoft for about two decades. She has a new book out, Microsoft 2.0 (John Wiley & Sons, May 2008), about what's next for Microsoft in the post-Gates era.

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