Suite smell of success: Office 2007 a retail hit, NPD says

Computerworld - Microsoft Corp. may be having trouble selling Windows Vista in retail, but its Office line is going like gangbusters, according to market research firm The NPD Group Inc. Part of the reason: people who switch from PCs to Macs.

Office 2007 on Windows is selling at roughly double the rate its predecessor, Office 2003, did in its first months after release, NPD analyst Chris Swenson said today. "Any way you cut it, the first six months, or a similar January-through-July period, or the first week or even the first month [of sales], no matter how you slice it, Office 2007 is selling much better than Office 2003 did," he said.

And even though Office 2004 for Mac is far from new, Swenson said, it's also contributing to Microsoft's suite success. "Mac Office represents about 20% of all Office sales in U.S. retail. At first, that seemed really surprising, but if I'm switching to Mac, there are a few key [software] products I'm going to buy, and Office is one of them."

In other words, even though they're leaving the PC behind and abandoning Windows, newly-minted Mac owners are still shoveling money at Microsoft, Swenson said. "Microsoft's still making the Office sale," he said.

Swenson's data comes from NPD's monthly reports of software sold at major U.S. retailers such as Best Buy Co. and CompUSA Inc., as well as data from the more than 180 Apple retail stores, and a few online sellers, including Amazon.com Inc. and Buy.com Inc.

Mac switchers aside, Microsoft's unheralded success selling Office -- Swenson noted that it typically gets buried by the bad news about Vista's retail performance -- stems from smart pricing. "The most important thing is the pricing of Home and Student 2007," he said, talking about the $149 package that lets customers install the software on up to three PCs.

"Eighty percent of all copies sold at retail are this edition," said Swenson. "When Microsoft came out with Version 2.0 of [this package], they started seeing increases not only in unit volume, but also in dollars." Swenson was referring to the licensing changes Microsoft made to the student-priced edition in 2003 that bumped up the number of allowed installs in the same household from one to three.

Second on Swenson's list of reasons for Office 2007's success is something Microsoft has little control over. "Part of it is clearly installed base," he said. "There are roughly 100 million more PCs now than there were in 2001, so even if the same percentage of users buy Office, sales go up."

But if Office 2007 is outselling its forerunner, why did Microsoft just roll out a $59.95 promotional price to students? "I think they want to drive demand for [Office 2007] Ultimate," said Swenson. "It's just not doing as well as Ultimate on Vista."

The Microsoft promotion, which runs through April 30, 2008, is available now to enrolled students in the U.S., Canada, and the U.K. who have a matching educational institution e-mail address. Next week, the program will expand to France, Italy and Spain.

Office Ultimate 2007, which lists for $679.95, includes Word, Excel, PowerPoint, Outlook, Access, Publisher, OneNote, Groove and InfoPath.

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