U.S. Markets close in 5 hrs 20 mins

XP's Support Cutoff Won't Rev PC Sales

Microsoft (MSFT) will end support for its Windows XP operating system on April 8, which could lead to security problems for personal computers running the 12-year-old software. Despite that threat, the deadline is not expected to spark a last-minute rush of PC upgrades.

Businesses and other enterprises have been aware of the cutoff for quite some time. Still, about 30% of PCs in use run the venerable XP operating system.

Many consumers and businesses using XP simply will roll the dice and continue using those PCs until they break down, analysts say. But they might not replace them with Microsoft Windows PCs when they do, despite hopes late last year that corporate sales were stabilizing.

"I was in one warehouse location where they had fixed terminals that were on XP and they're now going to iPads," said Victor Janulaitis, CEO of tech consulting firm Janco Associates. "So they're never going to do anything with those PCs. They're just sitting there. It's like an old-time punch-card time clock in a factory.

Many Windows XP machines, especially at small and midsize businesses, are running particular legacy applications, Janulaitis said. For instance, they could be running a payroll application in accounting or an inventory application in the warehouse, he said.

No More Windows?

When those PCs break down, they'll get new machines, but they might not be Windows-based PCs, he said. In addition to Apple (AAPL) iPads and Google (GOOG) Android-based tablets, computer makers now are selling low-cost computers running Google Chrome OS and even Android.

Windows XP debuted in October 2001. And most PC users stuck with it after the release of Microsoft's problem-plagued Windows Vista in January 2007.

When Microsoft came out with its well-received Windows 7 in October 2009, businesses and consumers started to switch. But upgrades stalled when Microsoft released Windows 8 in October 2012. Customers rejected Windows 8 because of its radical redesign, which made use of touchscreens even though few PCs at the time had them.

Barely 'Move The Needle'

With the clock ticking down for Windows XP support, "a good chunk of people who haven't upgraded yet probably will over the next couple of months," said Loren Loverde, an analyst with market research firm IDC. "But that volume won't be enough to radically move the needle for the PC industry.

About 70 million to 80 million Windows XP machines will be upgraded or replaced this year, Loverde said. That would be about half of new commercial PC shipments.

The main reason for upgrading is the security risk associated with running Windows XP after Microsoft no longer issues bug fixes and security patches for the OS, he says.

"There have been major security advancements since Windows XP that make later operating systems safer," said Brian Burch, vice president of global consumer and small business segment marketing for security software firm Symantec (SYMC). "As vulnerabilities are discovered, patches can be purchased but will be very expensive.

Fortinet (FTNT) predicted an increase in malware attacks targeting Windows XP machines this year after April 8.

"We predict hackers, already in possession of zero day exploits, will wait until the 8th in order to sell them to the highest bidder," the network security firm said in its 2014 predictions. "Because of their expected high price tag, these zero days will likely be used to launch targeted attacks against high-value businesses and individuals rather than deployed by common cybercriminals in order to propagate mass infections.

Personal computer security issues could spur more businesses and individuals to consider cloud-based alternatives like Google Chrome OS machines.

Research firms Gartner and IDC reported last week that PC shipments tumbled 10% in 2013, the industry's worst annual decline ever in 2013. Both blamed the growth of tablet devices.

"Strong growth in tablets continued to negatively impact PC growth in emerging markets," Gartner analyst Mikako Kitagawa said. "In emerging markets, the first connected device for consumers is most likely a smartphone, and their first computing device is a tablet. As a result, the adoption of PCs in emerging markets will be slower as consumers skip PCs for tablets.

Global shipments of traditional PCs will decline 7% in 2014 and 3% in 2015, Gartner predicts.

Meanwhile, Microsoft is hoping its next version of Windows, code-named "Threshold" and likely to be called Windows 9, will erase the memory of Windows 8. Windows 9 is rumored to return the PC operating system to the traditional look and feel of the computer desktop, last seen in Windows 7. Microsoft is currently targeting an April 2015 release, according to media reports.

Microsoft will preview the new OS at its Build conference, which will take place in San Francisco on April 2-4, just days before it pulls the plug on XP.

The negative PC forecasts from Gartner and IDC came despite reports that some sectors of the market, especially corporate PC sales appear to be stabilizing.

In late November, Hewlett-Packard (HPQ) shares gapped up on its fiscal Q4 report and guidance that beat Wall Street's views. PC sales were better-than-expected and showed signs of stabilizing.

Last month, Citi Research analyst Glen Yeung raised his rating on PC chipmaker Intel (INTC) to buy, based on research showing improved corporate PC demand.

Also in December, Richard Pzena, CEO of Pzena Investment Management, said corporate PC sales appeared to be stabilizing, boosting HP's prospects.