Microsoft forecast shows Office, Vista heading in opposite directions
Vista sales sluggish, while Office has strong growth
Microsoft Corp.'s Client revenue, which virtually all comes from sales of Windows Vista, grew just 2% year over year to $4.22 billion in its first quarter of 2009.
"That fell pretty far short of Microsoft's expectations," said Matt Rosoff, an analyst at independent research firm Directions on Microsoft. "That's always a worry, since it's the core of the company's business."
This was the second recent quarter out of three that saw Vista sales grow sluggishly or shrink. In Microsoft's third quarter of 2008, Client revenue fell 24% year over year, although sales grew 13% year over year in the intervening fourth quarter.
Vista's weak growth was in spite of 10% to 12% growth in PC shipments. Microsoft blamed the sluggishness on flat PC sales in developed countries and zooming sales of low-cost PCs -- in particular, netbooks. Customers in developing countries are more likely to buy PCs with cheaper, basic versions of Windows Vista installed. Or, if they buy netbooks, they are likely to get Windows XP Home or Linux, which results in little or no revenue for the software maker.
As a result, sales to PC manufacturers, which supply 80% of Vista's sales, actually fell 1%. (The rest of Vista revenue comes from volume licenses to big companies and retail purchases by consumers and small businesses.)
Microsoft hopes Vista can rebound in the second quarter with 7% to 10% growth during the traditionally strong holiday season.
"We think, particularly with Christmas coming up, that overall sales will be relatively good," said Microsoft CFO Chris Liddell during the earnings call. "We have reasonably good visibility into this quarter in terms of the inventory positions. We feel pretty good about some of the initiatives that we have in the unlicensed area. We've got channel inventory down to where we would like to see it."
But Rosoff said he is "surprised they are that optimistic for the holiday quarter."
Other bellwether vendors also lack Microsoft's confidence. Chip maker Intel Corp. expressed an uncertain outlook during its earnings call earlier this month. While Phoenix Technologies Inc., which supplies BIOS software for half of all PCs made, on Thursday cut its forecast for laptop sales growth in half, to 15% from 30%.
Microsoft acknowledged that the picture for Vista sales is bleaker for the rest of the year. It expects sales to increase just 2%, meaning that revenue in the last two quarters of the year might actually fall slightly from the prior year.
- 15 Non-Certified IT Skills Growing in Demand
- How 19 Tech Titans Target Healthcare
- Twitter Suffering From Growing Pains (and Facebook Comparisons)
- Agile Comes to Data Integration
- Slideshow: 7 security mistakes people make with their mobile device
- iOS vs. Android: Which is more secure?
- 11 sure signs you've been hacked
Changing the Way Government Works: Four Technology Trends that Drive Down Costs and Increase Productivity
This paper discusses four technology-based approaches to improving processes and increasing
productivity while driving down department and agency costs.
- Shifting Gears: The Value of Customer-Driven Quality in Manufacturing In today's competitive manufacturing market, the customer must be the center of the quality universe. This paper details how manufacturers can improve customer...
- Aberdeen Group: Marketing Analytics for Manufacturing: Forging Customer Insights There are no recalls for poor marketing. Manufacturers need to get their customer intelligence and messaging right the first time. Learn how.
- The Brave New World of Customer-Centric Manufacturing The Unique Opportunity for Manufacturers to Better Understand their Consumers
- Live Webcast Increasing the Value of Your Reports and Dashboards Learn how incorporating other analytical capabilities such as predictive modeling and visualization can increase the value of your reports and dashboards by providing...
- Testimonial: Cystic Fibrosis Trust Peter Hawkins, the Head of IT for Cystic Fibrosis Trust, discusses the role CommVault's Simpana software platform plays in improving the company's information...
- Increasing the Value of Your Reports and Dashboards Learn how incorporating other analytical capabilities such as predictive modeling and visualization can increase the value of your reports and dashboards by providing... All Management White Papers | Webcasts