Microsoft on Friday released the first of two expected final testing versions of Windows XP. Despite the turmoil created by Thursday's appeals court ruling, the software company completed Windows XP Release Candidate 1 days ahead of schedule. Release candidates are final testing versions before the software is sent to manufacturing and to PC makers. A second release candidate is expected in late July or early August. Sources close to PC makers said Microsoft has told them to expect gold -- or final -- code no later than early September. They will use this version to preload on new PCs. Availability of the release candidate comes just days after Microsoft and 600 partners, including retailers and PC makers, met in Las Vegas behind closed doors. While few details emerged from the non-disclosure Windows XP marketing meeting, Microsoft revealed that combined the group would spend as much as $1bn promoting the new operating system. Windows XP, which debuts on 25 October, will ship in two versions: Home and Professional. Basic features -- among them Internet Explorer 6, Windows Media Player, Windows Messenger and Internet firewall -- are essentially identical. The Home version is the upgrade to Windows 95, 98 and ME, while Professional replaces Windows NT and 2000. According to the release notes accompanying the software, Microsoft recommends a PC with a 233MHz Pentium processor and 128MB of RAM. But Gartner analyst Michael Silver suggested a 600MHz Pentium III processor would be better if regularly using high-end features, such as videoconferencing and multi-user login. "I would also recommend 64MB extra for each additional user," he said. Microsoft on Thursday said it would temporarily pull one of Windows XP's most controversial new features, Smart Tags. The XML (Extensible Markup Language) feature drew fire from Web developers fearful Internet Explorer 6 would hijack content from their sites. However, the decision to pull Smart Tags came too late for their removal from the first release candidate. They are not expected to appear in Release Candidate 2 or the shipping version of Windows XP. Release Candidate 1 will be distributed as part of the Windows XP Preview Program. People signing up for the program pay $9.95 to download the about 500MB preview release, or an extra $10 to receive a CD by mail. Those subscribing to the program will need a valid code from Microsoft to activate the software -- essentially locking it to their PC configuration -- or Windows XP will stop working after 14 days. Windows XP automatically guides users through the process, which is completed over the Internet or through a phone call to Microsoft. The first release candidate is feature complete, including support for HailStorm, one of the cornerstones of Microsoft's .Net software-as-a-service strategy. Through HailStorm, which relies on Microsoft's Passport authentication system, the company envisions delivering content and services to a wide range of devices, whether they be PCs, handhelds or mobile phones. Passport authentication is required to use several features, including Windows Messenger. But the release candidate comes as another hailstorm gathers over Windows XP. The appeals court decision, which found that Microsoft had illegally maintained its monopoly in Intel-based operating systems, opens Windows XP to attack from trustbusters and competitors. As part of its decision, the appeals court threw out a federal judge's order breaking Microsoft into two parts. On Thursday, Iowa Attorney General Tom Miller made it clear the Justice Department and 19 states would look closely at Windows XP as part of the crafting of a new remedy. "The company's recent announcements regarding XP and HailStorm indicate to us that Microsoft may be repeating its efforts to maintain and extend its monopoly even more broadly into the Internet," he said. While Windows XP was not the focus of the antitrust trial, the government has broad discretion exploring Microsoft's business practices since the trial's conclusion, said Glenn Manishin, an antitrust attorney with Patton Boggs in McLean, Va. "An antitrust remedy is supposed to be forward looking, so the District Court is always entitled to take into account anticipated or actual future developments in fashioning the remedy," he said. "Since the Windows XP operating system is the successor to the OS from the trial, similar concerns could be addressed to Windows XP, HailStorm and .Net." Potentially more devastating, the appeals court found that Microsoft's commingling of code -- combining Internet Explorer with Windows 95 and 98 -- "has an anti-competitive effect" because it may deter developers' interest in competitive products. Because of Microsoft's more aggressive bundling of new features into Windows XP, the company faces new challenges because of the court's ruling. Anyone who can show Microsoft's integration of features is anticompetitive in a way that protects the operating system monopoly could make a claim against the company, said Hillard Sterling, an antitrust attorney with Chicago-based Gordon & Glickson. "Plaintiffs are already developing new theories of monopoly maintenance based on upcoming technologies," he said. "They will use the monopoly findings as ammunition. In these plaintiffs' views, they're halfway home. All they need to show is anticompetitive impact." See also: ZDNet UK's Windows XP News Section. 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