Microsoft’s reputation at stake as Windows 7 gets set for its debut

After two decades at the center of Microsoft’s business, and three years in the technology industry’s doghouse, the Redmond company’s Windows division will try to recover with the Oct. 22 release of an overhauled version of its flagship PC operating system.

Despite positive early reviews for Windows 7, the pressure is high. The Windows business could literally afford another flop, with more than $10 billion in annual profits and a dominant position on personal computers. But the struggles of Windows Vista have put something else on the line.

“The company’s reputation is riding on this,” said analyst Roger Kay, president of the Endpoint Technologies Associates research firm in Wayland, Mass., and a consultant to the Windows division.

The outcome will determine the fate of a product line that, perhaps more than any other, has been responsible for making the Seattle region a major technology center. With the Windows 7 launch, Microsoft will be attempting to overcome the difficult economy and ensure a role for Windows in a world increasingly focused on mobile phones, consumer gadgets and online services.

That’s a tall order. But if the experience of Jonathan Prentice is any indication, Microsoft might just have a shot.

Prentice, a 33-year-old technology consultant, was a New Zealand college student 14 years ago when his enthusiasm for Windows 95 won him momentary fame as the first person in the world to buy it. But like many others, he greeted the January 2007 launch of Windows Vista with a shrug — using it reluctantly, only to endure the performance and compatibility problems that made Vista a constant target of criticism, jokes and Apple Mac ads.

Windows 7 has made Prentice a fan again. He has been using a preliminary version for several months and describes the new operating system as fast and easy to use, and points to improvements in areas including its ability to connect with and manage printers, devices and other PCs over a network.

As a longtime Windows user, Prentice doesn’t like some aspects of Windows 7, such as the streamlined control panel — which he immediately switched to “classic” mode. But overall, he says, Microsoft has “actually produced a pretty damn good OS without needing a service pack to make it usable.”

He isn’t alone in that assessment. Early reviews of the new operating system have been largely positive, with influential Wall Street Journal technology columnist Walter Mossberg recently calling Windows 7 “the best version of Windows Microsoft has produced.”

Microsoft’s challenge now is to translate that momentum into success in the market. In particular, industry analysts will be watching to see if Windows 7 can avoid the hardware and software compatibility problems that plagued Windows Vista’s debut. Another key test will be how quickly Windows 7 is adopted by big businesses, particularly those that avoided Windows Vista.

Microsoft needs independent software vendors to make programs that work with new Windows 7 features, such as support for touch-sensitive screens. That would give PC users extra incentive to upgrade.

Financial measures will also be closely watched. Microsoft reported an operating profit of more than $10.8 billion from Windows for PCs in its fiscal year ended June 30. That was more than half the company’s overall operating profits for the year — but down from more than $13 billion the year before.

Over the years, the Windows business has given Microsoft the financial resources to make long-term bets in areas such as video games and online services, where sustainable profits have proven much harder to attain.

Microsoft also wants to keep Windows PCs at the center of the evolving digital world. To do that, the operating system needs to work well as a hub for mobile devices and as an access point for internet services, in addition to running traditional PC software.

Windows also needs to be compelling enough to make people stick with it as web-based applications make the underlying operating system less significant in the overall computing experience. A growing number of applications now run inside web browsers, making them accessible on Macs and Linux-based machines, in addition to Windows PCs, cutting one of Microsoft’s biggest historical advantages.

Direct competition is also getting tougher. Macs have gained momentum in recent years — accounting for about 9.4 percent of U.S. computer shipments in the third quarter, according to research firm IDC — as Apple has introduced more people to its brand through the iPod and iPhone. Google has announced plans to introduce its own PC operating system, Chrome, next year.

“Both in terms of Windows’ strategic role going forward and its historical role in Microsoft’s revenues, Microsoft can’t afford a Windows launch that’s anything less than totally successful,” said Michael Gartenberg, vice president of strategy and analysis at Interpret LLC research firm in New York.

For the development of Windows 7, Microsoft handed over the engineering reins to Steven Sinofsky, a veteran Microsoft Office executive who has since been named the Windows Division president.

Sinofsky’s team focused heavily on improving the underlying performance and reliability of the operating system.

At the same time, the team added new elements to the user interface, including a larger and improved task bar for launching and interacting with applications, and features including one called “Aero Snap” that quickly fits open windows to half of the screen when they’re dragged against the side. New features in versions of Windows 7 for businesses include the ability for mobile and branch-office workers to more easily access data.

The user interface enhancements are one of the hooks for Prentice, the Windows 95 fan in New Zealand who has been using Windows 7 since the first public test version. With the new operating system now set for widespread release, his advice to anyone running Windows Vista is simple.

“Upgrade,” he says. “Upgrade as fast as you can.” – TechFlash

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