In an effort to placate hardware vendors that are scared that delays in the launch of Windows Vista will dampen holiday PC sales, Microsoft is offering a discount to consumers and small businesses that want to upgrade from Windows XP to the new OS.

The software giant will offer an upgrade coupon to shoppers who buy a Vista-capable PC between tomorrow and 15 March, 2007, allowing them to redeem the coupons for a free or discounted upgrade from Windows XP to Windows Vista and from Office 2003 to Office 2007.

After a series of delays, Microsoft expects to ship the Vista OS to consumers in January 2007. The product offers features such as translucent desktop windows, improved performance of digital music and photography, and data backup for business users. But those features come at the cost of greatly increased demands on hardware performance. A Vista-ready PC must have at least 512MB of memory and an advanced processor and graphics card.

PC vendors and component manufacturers stand to profit from the boost in demand for those parts, but they have grown increasingly nervous about missing the holiday sales season as Microsoft has missed several deadlines for shipping the new OS.

"I definitely see it as a move by Microsoft to appease PC vendors and key component manufacturers such as Intel. Microsoft has very little goodwill left with the vendors, having disappointed them several times with Windows Vista delays," said Martin Kariithi, an analyst with Technology Business Research.

In fact, this is a smart way to achieve that goal, since Microsoft will probably incur only a small charge to maintain the coupon programme, and not lose much potential profit compared to the full Vista sales price, he said.

Also, Microsoft will share the costs of the upgrade programme with vendors such as HP, which needs to give consumers enough confidence to buy PCs now instead of later.

"We do believe that the Vista Express Upgrade programme will help early adopter customers who prefer to upgrade to Windows Vista, but would also like to take advantage of the myriad promotions and discounts typically offered during the holiday period," said HP spokeswoman Tiffany Smith.

The exact cost of the upgrade will vary between PC vendors, with some offering new customers a free upgrade from Windows XP Home to Windows Vista Home Basic, XP Media Center Edition 2005 to Vista Home Premium, or XP Professional to Vista Business.

Others are likely to charge "a nominal fee" to upgrade from Windows XP Professional, XP Tablet PC Edition or XP Professional x64 Edition to Windows Vista Business or Vista Business 64, Microsoft said.