Office 2007 sales off to faster start than last release

Market researcher says initial purchases of new suite top similar stats for Office 2003

First-week retail sales of Office 2007 were more than two times greater than the purchases of Office 2003 in the week after its launch in October 2003, according to market research firm NPD Group Inc.

Unit shipments of Office 2007 during the week that started Jan. 28 were up 109% over the first-week shipments of Office 2003, based on data that NPD collected from several retailers, including, Best Buy, Circuit City, CompUSA, Kmart, Office Depot, OfficeMax, Staples and Target. Port Washington, N.Y.-based NPD said the dollar value of Office 2007 sales was 106% higher than that of Office 2003, despite a small drop in the desktop software suite's average retail selling price, to $206.93.

"I was told by several retailers that sales of Microsoft Office greatly exceeded their projections," said Chris Swenson, a software analyst at NPD. He declined to disclose the actual sales figures that have been reported to NPD.

Swenson said that, during December, following the software's Nov. 30 launch for corporate users, sales of Office 2007 in the business channel were also up compared with the first-month sales of Office 2003.

Unit shipments of Office 2007 were 61% higher among large value-added resellers, such as CDW Corp., CompuCom Systems Inc. and Softchoice Corp., Swenson said. He added that the dollar value of sales by the VARs was 98% higher, partly because the average selling price for business purchases has jumped from $245.61 on Office 2003 to $301.33 on Office 2007 -- a 22.6% increase.

Swenson attributed the higher business pricing to Microsoft's "versioning strategy" for Office, which he said is helping the vendor upsell companies to more feature-rich versions of the software.

Microsoft also wants to upsell consumers, Swenson said, noting that more than 85% of Office's retail sales last year involved its discounted edition for students and teachers. With Office 2007, Microsoft has removed its Outlook e-mail client from that version, now  called Office Home and Student, replacing it with its OneNote digital notebook software.

Comparing sales of different versions of the same software can be tricky, though. Office 2003 wasn't encumbered by being released in the shadow of a concurrent operating system launch, as Office 2007 was with Windows Vista. But its release came just two and a half years after the introduction of Office XP, and Office 2003 also debuted during the throes of an economic and IT spending slowdown.p>

The initial retail sales of Office 2007 may have benefited from pent-up demand on the part of early adopters who were forced to wait out Microsoft's development delays, Swenson said. However, they also may have been pulled down somewhat by the new ability to buy and download Office or Vista from Microsoft's Windows Marketplace Web site. Users of that site can download Office via a so-called digital locker operated by Circuit City Stores Inc., but NPD doesn't count those purchases as part of regular retail sales.

Swenson said Office 2007 sales likely will drop off from their first-week levels. But based on what happened with prior versions of Office, sales should pick up again and climb steadily over time, he predicted.

"Office 2003 had legs," Swenson said, pointing out that the U.S. retail market for office productivity software -- of which Microsoft has a 97% share -- grew 12% year-over-year during 2006. That was "a phenomenal growth rate, given how late it was in the Office 2003 release cycle," he said.

Copyright © 2007 IDG Communications, Inc.

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