XP sales forecast

2001: 5.38m 2002: 56.87m 2003: 109.36m 2004: 163.58m 2005: 184.04m XP home and professional editions Source: Gartner

This time round, Microsoft promises a similar shift.

"Windows XP is the biggest advance since Windows 3.1", said Microsoft chief executive Steve Ballmer at the launch of the new operating system in London.

And he predicts that XP will be twice as successful as Windows 95.

Computer makers hope he is right.

Revitalising a flagging market

For the first time since 1986, demand for PCs is flagging. During July to September, sales plummeted 11.3%, according to computer research firm Gartner Dataquest.

There are numerous reasons for the decline:

• Business customers are reluctant to invest yet more after paying for expensive upgrades to beat the millennium bug.
• The bursting of the internet bubble has flooded the enterprise market with hardly used, high-end hardware and software.
• Consumers are reluctant to spend, worried that the global economic downturn will hurt their wallets.

Microsoft will not be able to overcome a slow economy and market saturation

Charles Smulders, Gartner

Simon Calver at Dell UK, in charge of sales to home users and small businesses, says that if consumers are happy with their system there is no reason to upgrade.

"There is no dramatic change with this software. But if people begin to use more digital pictures or want to process digital video, they may want to consider buying XP and get a new computer," he told BBC News Online.

Steve Ballmer admits that companies have little reason to upgrade from Windows 2000 to Windows XP

For businesses, it is not much different. "We don't want our customers to buy systems they don't need," says Mr Calver, who explains that firms should consider XP if they want improved connectivity for their mobile workforce or plan to offer specialised services like advanced online customer support.

For those who believe that XP is right for them, the decision to buy the software could trigger yet more expenditure. XP is the most resource-hungry operating system yet.

XP Specifications

300 MHz processor 128 MB Ram 1.5GB hard disk space Super VGA video adapter CD-Rom or DVD drive

To install the software with confidence on an existing computer, it should be not older than two years and come with plenty of memory.

Upgrading to XP should therefore help drive computer sales.

Dell's chief executive, Michael Dell, says he expects his sale figures to grow during the last three months of the year, despite the global slump. Dell UK, for example, is hiring 500 temporary employees to cope with the demand.

However, rising sales in the run-up to Christmas are not much of a surprise, despite the market's overall weakness.

XP is 'no demand driver'

So will consumers go out and buy PCs just to get a new operating system that will make their computer screens look like a bright and colourful Apple Mac without losing the familiar wording of Windows' drop-down menus?

In Europe only 27% of all homes have a PC, there is plenty of space to grow

Simon Calver, Dell UK

A closer look at Microsoft's own figures shows that the XP boost may be smaller than the hype suggests.

Oliver Roll, in charge of Microsoft's marketing in the UK, predicts that XP will be "twice as successful as Windows 95" in terms of units shifted. That sounds impressive, but ignores the fact that annual PC sales have more than tripled since then.

In relative terms, Microsoft expects XP to be less successful than Windows 95.

At research firm Gartner, analysts warn that while "Windows 3.x, Windows 95 and Windows 2000 did wonders for sales", Windows XP "will not be a primary driver of PC sales in 2001 and 2002".

Gartner has just sharply revised downwards its forecast for the last three months of 2001. The firm now expects year-on-year worldwide PC shipments to drop a further 13%; previously it predicted a 6% slide.

The XP advantage

Businesses especially will be reluctant to switch.

Microsoft's previous operating systems for the corporate world, Windows NT and especially Windows 2000, have proven to be highly reliable.

The experts at Gartner are telling their clients not to upgrade to Windows XP unless they are absolutely sure to get "a quantifiable return on investment".

Home users are likely to notice bigger improvements.

The wish to replace crash-prone Windows 95 and 98 with XP - which experts have praised for its stability - could drive demand.

But Charles Smulders of Gartner warns that Microsoft "will not be able to overcome a slow economy and market saturation".

The majority of new PC sales, he says, will be "replacements of old systems at the end of their lives".

Dell's Simon Calver, however, sounds more upbeat: "In Europe, only 27% of all homes have a PC. There is plenty of space to grow."