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Microsoft forecast shows Office, Vista heading in opposite directions

By Eric Lai
October 24, 2008 12:00 PM ET

That is despite Microsoft's own forecast that PC shipments would grow from 8% to 12% for the year. The reason, again, is the expectation that Vista sales will be flat in developed countries and that non-Vista netbooks will drive PC unit growth.

Office 2007 enjoys strong growth

Office 2007, meanwhile, appeared to continue its unbroken string of stellar growth. Revenue in the Microsoft's business division grew 20% year over year to $4.95 billion.

The company doesn't break out the percentage of the business division's revenue that comes from Office. Microsoft has added several highly profitable products to the division in recent years, most significantly, Exchange Server, which Rosoff estimates is almost a $2 billion annual business.

Still, Office undoubtedly comprises the majority of Microsoft's business division revenues, Rosoff said. Those revenues are expected to grow 7% to 8% in the next quarter, and 12% to 13% for the entire year, far higher than Client (Vista's) revenues.

Microsoft Office has beaten back many threats during its long era of domination. But with the weak economy and the advent of credible software-as-a-service competitors such as Google Docs, cheaper desktop competitors such as IBM Symphony or the much-improved, free OpenOffice 3.0, could Office's grip on 550 million users finally be weakening? Rosoff isn't buying it.

"I've heard this argument many times over the years. But Office continues to have a real stranglehold in the corporation," Rosoff said. "In the absence of evidence to the contrary, I think it's going to stay that way."

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