Although Windows 98 was only available from Microsoft in the second half of last year, the numbers for Windows 95 that year are a telling reminder about the computer marketplace.

Windows 98 dominates the home market and is growing

Operating system market share, 1998 OS % of market Windows 95 57.4 Windows 98 17.2 Windows NT 11 Mac OS 5 DOS 3.8 Linux 2.1 Windows 3.11 1.1 Unix .8 OS/2 .5 Others 1 Source: IDC

in popularity with small and medium-sized businesses. But large businesses have stuck for the most part with Windows 95 and even the previous version, Windows 3.11, particularly those large organizations with long-term software licenses.

Windows 95 accounted for 57.4 percent of the desktop operating system market last year, according to market research firm International Data Corporation. Windows 98 took 17.2 percent of the roughly 89 million units shipped.

The trend appears to be continuing in 1999, figures show. Sales figures from PC Data indicate Windows 95 clearly continues to outsell Windows 98 in the corporate market this year, but the older version is losing steam.

Microsoft sold 81,002 copies of Windows 95 outside of PC purchases to large customers in January vs. 9,897 for Windows 98. By May, the older version had dropped to 21,313 units, and Windows 98 had climbed up to 14,432.

While Windows 98 has become a standard feature for consumer PCs, corporate desktops and laptops still mostly feature Windows 95. Many customers and PC makers will likely hold off on upgrading until the release of Windows 2000, Microsoft's corporate OS due in October, analysts said.

"Windows 95 didn't cease to ship just because Windows 98 was launched," said Dan Kusnetzky, an IDC analyst. "Windows 95 did the work a lot of people wanted done, so why change? There wasn't sufficient new technology that was evident from the sidelines to make people want to change."

With 15 million units shipped in 1998, Windows 98 sold better than Windows 95 in its debut year by 2 million, Kusnetzky said. But the total desktop operating system market grew by more than 14 percent, from 79 million to 89 million units.

"This is not terribly surprising," said Dwight Davis, an analyst with Summit Strategies. "Many people noted at the time that Windows 98 wasn't a stunningly different operating system, to put it kindly. There was no real major reason to shift over to Windows 98 if they were already on Windows 95."

Microsoft, for its part, contends that such comparisons in market share are invalid because of the midyear release of Windows 98. "This is not an apples-to-apples comparison," a company spokesperson said. "This is five months of sales compared to a full year for Windows 95."

Conservative buyers

Another factor in 95's favor: Corporate buyers are notoriously conservative. A testament to this conservatism is the fact that Microsoft's Windows 3.11 operating system, released in 1992, still shipped 1.3 million units last year, according to Kusnetzky.

"It ships only to big companies that have long-term contracts," he said. These companies follow the adage, 'if it ain't broke, don't fix it,' when it comes to testing and implementing new software, he said.

Many buyers are indeed waiting for the next version and for the Y2K dust to clear, analysts say. "For those systems that can accommodate it, I expect to see a migration to Windows 2000, although it will vary from company to company," Davis said. "There is probably a pent-up demand from companies who have put off purchases because of Y2K."

Computer makers are the first to note that they ship more systems to corporate customers with Windows 95 than Window 98. The majority favor Window 95 OSR2, the most recent upgrade to the original release.

It should be noted that while PC makers allow corporate customers to purchase computers with Windows 95 pre-loaded, most regular home consumers do not have that luxury. In fact, few of the major PC companies will let an individual customer order Windows 95 as an option, which obviously boosts Windows 98 market share among consumers.

Dell Computer offers two basic PC lines: OptiPlex, for large corporate customers, and Dimension, for home users and small businesses.

Daniel Young, Dell's director of OptiPlex marketing, said most corporate buyers take Windows 95 or Windows NT over Windows 98, with the majority favoring 95.

"Most corporate customers want to avoid the pain of an operating systems switch and would rather wait for the next operating system down the road," Young said. While Dell has seen some increase in Windows 98 in the corporate market, it ships more OptiPlex systems with Windows 95.

Buyers of the Dimension model, on the other hand, overwhelmingly favor Windows 98, with few choosing Windows 95.

The same is true for Compaq Computer, which ships Windows 98 on the majority of its Presario consumer PCs and ProSignia small-business PCs.

Like Dell, Compaq ships more of Windows 95 than anything else on its corporate Deskpro PCs. But that is beginning to change on two fronts, said Scott Edwards, Compaq's manager of desktop marketing.

"There was a lag there initially after Windows 98's release where there was no interest at all, but that has all started to change," Edwards said. "We're seeing greater uptake of Windows 98 as customers find it to be more stable and manageable than Windows 95."

Marc Jourlait, director of worldwide market development for the mobile computing division at Hewlett-Packard, said corporate technology managers face three disturbing changes on the horizon: Year 2000, Windows 2000, and the introduction of Intel's Pentium III mobile processor later this year.

"What we're hearing from [information technology] managers is make things simple and stable for the next 12 months or so," Jourlait said. Large customers would like to avoid "requalifying" operating systems during this transition time, he said. "Nobody's trying any new architectures or anything new from the ground up. They're focusing on stability."

Surge in Windows NT

Windows NT sales are also picking up dramatically, Edwards said. While NT has the smallest installed base, it has the fastest growth rate in terms of sales, as customers look for the easiest upgrade path to Windows 2000.

In fact, Windows NT showed surprising growth last year, accounting for 11 percent of the desktop operating system market. There were 2.8 million more shipments of Windows NT Workstation than in 1997, according to IDC.

Corporate portable computers are also overwhelmingly shipped with Windows 95. That is the case with Dell's Latitude notebooks as well as the Armada 7400 from Compaq.

"Manageability is part of the basis of the reason corporate customers are staying with Win95 and it is the bulk of sales," said Eric Brennan, director of North America marketing for Compaq?s portable division. "They chose the operating system back in '95 or '96, and due to the stability and consistency and keeping an operating system for a long period of time, they have stuck with that."

Linux garnered 2.1 percent of the desktop operating system. Linux is more popular as a server operating system than as a desktop client, Kusnetzky said, because there are far more applications written for Windows.