By Paula Rooney & Edward F. Moltzen
The coupons are designed to help push PC sales, and will provide XP system buyers with either a free or discounted upgrade to Vista, once it ships next year.
Microsoft later this month plans to roll out an Express Upgrade program that gives buyers of Windows XP-based PCs a coupon for a free or discounted upgrade to Windows Vista through March 15.
As part of the deal, designed to drive PC sales though the holiday season, Microsoft will include coupons in each Windows XP SKU that will entitle users to a free or discounted Vista upgrade when the next-generation operating system ships in the first quarter of 2007, industry sources said.
For instance, customers who buy PCs equipped with Windows XP Pro, Windows XP Pro Tablet PC Edition and Windows XP Pro x64 Edition are entitled to a free upgrade to Vista, sources said. Customers will be responsible for fulfillment costs.
Not all of the coupons will be for free upgrades. Customers who buy systems running Windows XP Home Edition can upgrade to Vista Home Basic Edition for a flat $49 fee and to the higher-end Windows Vista Home Premium Edition for a cost of $79.
The Windows Vista Technology Upgrade Program runs from Oct. 26, 2006, through March 15, 2007. Distributors are expected to have the new SKUs in house for system builders by Oct. 15. News of the planned coupon and promotion emerged in June.
System builders must meet certain requirement to sell the new SKUs of Windows XP. The Technology Upgrade Program, for example, states that only systems running Windows XP that meet Windows Vista requirements will be eligible for the Express Upgrade, sources said.
Each of the new SKUs will ship with an amended system builder license that requires PC makers to ship the coupons only with complying systems. System builders also must agree to support the systems after the user upgrades to Vista.
Microsoft would neither confirm nor deny that a coupon program is in the offing. "We are talking with all of our partners about plans for an offer. But those discussions are ongoing, and we have nothing more to share at this time," a Microsoft spokesperson said.
Industry observers praised the plan for the coupon and predicted that it won't be as rough of a holiday selling season as system builders expected when Microsoft announced earlier this year that it would delay the shipment of Vista until January 2007. Microsoft originally had said Vista would be generally available by the end of 2006 and in time for the holiday PC buying season.
"Now I can sell Windows XP Pro with a coupon that will give the customer an upgrade to Vista," said one source in the channel who declined to be named.
Executives from several tier-one manufacturers, including Dell, have said they expect Microsoft to launch promotions in the fourth quarter, ahead of the official Vista launch next year, to keep the market buying systems until the OS ships. "They don't want us to miss the holiday buying season," said David Chang, president of Agama Systems, a Houston-based system builder. "I think this is [targeted at] end users and small-business accounts. The big company, the government and the schools will continue using what they are using until Vista comes out.
"The Fortune 1000, top corporate and medium-sized business -- many of them are not going to just switch everything to Vista until it proves they can work with the interface," Chang added.