Office and Vista: Can't we give Microsoft some props?

Office and Vista: Can't we give Microsoft some props?

Summary: Microsoft posts its best fiscal first quarter in years and Wall Street cheers. But the angst goes on.


Microsoft posts its best fiscal first quarter in years and Wall Street cheers. But the angst goes on.

  • Derrick Shields at SeekingAlpha asks how can Microsoft stay competitive. The common refrain: The days of Office and Vista are numbered. We've heard this before--repeatedly for a decade. Wake me up when these units combined only make about say about $2 billion combined. In the first quarter (Techmeme) the client division (Vista, XP) and business division (Office) had combined operating earnings of $6.05 billion.

  • Ben Worthen at the's Business Technology blog notes that corporate IT departments are funding Microsoft's Google chase. The argument: Microsoft's enterprise sales are driving the software giant's quest to become an advertising juggernaut. You don't say. Call me crazy but didn't Office and Windows fund a bunch of new ventures like SQL, Silverlight, Sharepoint and Xbox? If you have a cash cow you milk it to find new growth.

  • Matt Asay at CNET's Open Road blog wonders why open source hasn't put a dent into Microsoft. Matt asks: Who wins in the stand-off between open source and proprietary software? And when? My answers: No one wins the stand off since it's not a zero sum game. As for the when: Much longer than anyone can imagine.

Simply put, a lot of folks spend so much time bitching about Vista and Office that they overlook one key point: Folks are buying this stuff.

On Microsoft's earnings conference call CFO Christopher Liddell said:

Clearly we are very happy with the client division overall. As you’ve seen since we launched Vista, the revenue growth has been in excess of 20% three quarters in a row, so the overall [headline] number, very good.

In terms of the premium mix, also very happy about that. Now, in this case, premium mix brings in both Vista and XP premium sales as well, and that’s tracking in the mid-70s, so 75% for the quarter, and that compares to I believe 59% in the equivalent quarter last year, so up 16 points year over year. So we’re very happy with the adoption of Vista Premium and also happy with the old XP Media sales as well.

The other thing I’ll point to is on the client annuity agreements, which is probably the best leading indicator we can think of of people’s intention to adopt, that’s still very early in the adoption cycle for businesses, but the volume licensing portion of our business was up 27% in the client area, so that’s a very good leading indicator from our point of view.

And sort of finally, as a wrapper, year-to-date sales are now 85 million units for Vista. That compares to about 45 million for XP over the same period, so almost twice as much.

It was a similar song and dance for Office.

At some juncture Windows and Office will naturally reach the end of their dominance, but don't hold your breath. And by time Windows and Office lose their mojo they will have funded a bunch of new businesses that may surprisingly pick up the slack.

Topics: Windows, Collaboration, Microsoft, Operating Systems, Software

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.


Log in or register to join the discussion
  • That's just crazy talk Larry

    You're a part of the tech blogosphere inner-circle. As a requirement of that membership you're supposed to bash all things Microsoft and blindly promote all things Web 2.0, regardless of facts.

    I can't handle the culture shock of an opinion that might differ from the usual Techmeme-sanctioned perspective on the world. ;)
  • Simply put

    [i]Simply put, a lot of folks spend so much time bitching about Vista and Office that they overlook one key point: Folks are buying this stuff.[/i]

    Of course they are. After all, they come preloaded with new computers and large enterprises have gone to a rental basis where not paying the rent would shut them down.

    That doesn't mean that MS software is crap, but it also doesn't mean that people are beating down the doors to Best Buy to buy copies, either.
    Yagotta B. Kidding
    • How many are now buying computers...

      ... because The New Windows is now available?

      I still think most people who buy Vista on a new computer would not be able to define an operating system. But branding by both Microsoft and the computer sellers makes a mystery interesting.

      And selling twice as many copies as XP over the same period shows that the buying isn't just proportional to ordinary activity.
      Anton Philidor
      • apples and pears

        [i]And selling twice as many copies as XP over the same period shows that the buying isn't just proportional to ordinary activity.[/i]

        Last year around this time every body was holding its breath awaiting vista, which caused a slowdown in sales.

        Furthermore it would be interesting to compare the figures next to the total amount of computers sold.. The numbers are impressive, but without a reference to the total amount of pc's sold, it doesn't say that much (estimation for this year was approximately 250 mln new pc's, so that would mean till the end of the year, they would have approximately 120 mln licenses sold of Vista at the years end.

        The margins on Vista however are impressive, but it makes you wonder how long businesses are willing to pay such a price ( if I knew one of my vendors was making these margins i would definitely demand a price cut)
        • Good to agree.

          I was observing that Vista sells computers. As you commented:

          "Last year around this time every body was holding its breath awaiting vista, which caused a slowdown in sales."

          Surprising how much anticipation there was for a computer product, at least for non-owners of Macs, no?!

          Also, if Vista is selling more tghan twice as fast as XP, that shows both that Vista is a reason for buying a pc and that more people are deciding to buy. I don't think sales pre-Vista had doubled over the past five or six years.

          Your comment that annual sales of 250 million pc's would mean sales of 120 million licenses sold for Vista confused me. Thought Windows was on a higher percentage of new pc's. And Vista can be expected to be the most selected form of Windows. Some organizations, even people, may roll back to XP, but they still count as Vista sales.

          On the margins, yes, once the software has been written the margins are high. But vendors do demand a price cut. OEMs pay (what?) $50-$60 a copy, and volume purchases are also substantially less expensive, whatever public statements Microsoft might choose to make.

          My conclusion, if you want an example of branding and the money it generates, look to Microsoft Windows.
          Anton Philidor
          • my reasoning

            [i]Your comment that annual sales of 250 million pc's would mean sales of 120 million licenses sold for Vista confused me. [/i]

            Ok, i forgot the reasoning, we've on 3/4 of the year, Vista sales are 88, if you extrapolate this would become somewhere around 120 million.

            Last expected sales I've seen for pc's worldwide where for 250 mln in 2007.
      • Another thing to consider

        I am scrambling to buy new computers for my employer not because Vista is available, but because we expect XP to become unavailable soon. So perhaps the Vista purchases are the normal baseline purchases and the XP purchases are due to demand created by obsolescence.
        Michael Kelly
        • Well...

          ... XP will definitely available until January, 2008 and afterward.

          Vista new is outselling XP new 2 to 1. If the market hasn't doubled, that's demand pent up for a new Windows operating system, any new Windows operating system.

          The XP sales might be considered icing on Microsoft's profit and loss statement, messy but appetizing.
          Anton Philidor
          • Of course, that COULD mean....

            that ONLY 50% of Vista buyers are replacing it with XP...

      • Most likely - virtually nil

        The number of computers sold today,and the market for new machines, vs the number sold at the intro of XP is VASTLY greater. You buy a new machine and it comes with Vista.

        Unless a new version of an OS, ANY OS, offers something incredible (which hasn't happened yet) buyers simply take what comes on the machine. Only a few geeks and hobbyists run out and buy a super duper new machine just to run a new OS.

        Of course a monopoly can offer a crummy starter version of their new OS and then offer a "premeium" version and charge the OEM, and buyer, more for that; thus increasing sales & profit numbers on that new OS.
        • Remember last Christmas?

          OEMs were downcast at not having a new version of Windows to sell. The upgrade tickets were poor consolation.

          Only geeks care what the OS does and how it's done, the more technical aspects. Many of the people waiting so eagerly for the new Windows needed to know nothing more than that it was the latest and greatest from Microsoft. Actual features were an anticipated bonus.

          Those who waited eagerly are not everybody. And the growth in the overall pc market was not astounding. But because of the brand - you know, Microsoft, the most respected and beloved brand in computing, at a cost of billions - the whole computer industry benefitted from Vista. And Microsoft not least.

          Speculation: Microsoft's profits are greater than those of its 5 best customers combined. No facts, just good reason to think that might be true.
          Anton Philidor
          • Christmas 06

            MS had been pushing a new os that was gonna be the greatest thing since
            sliced bread. It was going to revolutionize the world of computers. They
            FRIGHTENED people into being scared to buy an XP machine. If they hadn't
            hyped Vista so much, the problem never would have happened.

            When Vista was released, it was a big ho-hum. Hardly revolutionary. Any
            buyers who put off purchase then bought a machine and ended up with

            Apple has the same thing this year. If 10.5 had been delayed, Christmas
            sales would have suffered - because of the hype on 10.5. Now that people
            know what's coming in 10.5, we find it has some nice new things, but is
            not revolutionary.
          • Did Microsoft hype Vista early and often?

            The large marketing budgets came, I thought, when the product was almost ready to be released. That would make sense, in that scaring people from buying devices with XP would have annoyed Microsoft's partners. And Microsoft makes only slightly more money on each sale of Vista (in Microsoft's contexts), so delaying regular purchases would have been only an accounting change.

            The company does have both the buy-a-computer-get Windows market and the It's a new Windows! market. The latter is comparatively small, but only a few tens of millions of people matter to company profitability.
            Anton Philidor
          • Money, greed, cash-piles

            From the user's point of view should Microsoft's never ending revenue stream be
            completely uninteresting. They want or need a computer, that's it.

            Is the computer any good?
            Can it do what I want?
            Is there an alternative which is better?

            Most of us computer-geeks *know* that the Microsoft alternative leaves a lot to
            be desired, the lack of quality is appalling in some ways, but people buy their
            software anyway.

            Speculation 1: It's because of MS's illegally constructed monopoly.
            Speculation 2: They are most respected for their cash-pile.
          • #3

            For the average user ther is nothing better or even as good as Microsoft.
          • HAHAHA

            Fanboy ignorance. Go share a banana with Monkey Boy
    • Simply put it's simple ignorance

      [i]Simply put, a lot of folks spend so much time bitching about Vista and Office
      that they overlook one key point: Folks are buying this stuff.[/i]

      Simply put.... they don't know what else to buy... They know nothing about Apple
      and have head to many ignorant lies by the few idiot microsoft geeks they actually
      do know.

      Every single time I have ever heard a techie talk smack about Apple, I question
      them about it... Not a single one of them...nada..nil..never.. has ever had a single
      bit of experience with a Mac... and definately not a bit of experience with Apple in
      the last 5 years (where it counts the most)....

      Comcast has an army of installers for high speed internet and every single one of
      them is afraid of the mac... simple ignorant fear.. they don't know how to do thier
      job if there is a mac in the home. They don't know how to ping or renew an IP
      address... and as a result, they are overwrought with fear. The only thing they can
      do is ask if the customer has a PC... running a version of windows they are trained
      to support... For some reason, consumers hear nothing but negative about Apple...
      And they take the advice of someone who has already told them they know nothing
      at all about Apple.. but yet they somehow think they are qualified to talk about it....

      Someone who know nothing but AOL will be terrified of the real internet...

      These people only know to buy what they are familiar with... Most lack the energy
      to actually think for themselves.. it's so much easier to let others do their thinking
      for them... So they continue to buy Vista and Microsponges crap software...

      Granted.. Word and Excel are good products and they work great on a Mac.. but
      just like word perfect.. it's only a matter of time before somoene builds a better
      office suite.
    • More simply put

      Follow the money. VCs have shyed away from Linux for years. Microsoft got some exclusive deals but in honesty, if you could have one, you'd turn it down? You tell you clients that you don't want long term contracts, only year to year cause there may be someone more deserving out there? How altruistic of you. <br>
      If there was money to be made in Linux, companies reselling linux would have sprung up long ago. <br>
      Now this doesn't mean Microsoft's numbers aren't from the fact they are preloaded....not Office so fact most any machine only comes with trial versions and it's extra to get Office so the consumer IS Choosing it if they get it from a Dell or an HP. But by the very nature of the market, Microsoft's popularity is why they are on the top of every OEM's list. Even the European OEMs offer Vista as their marquee choice and I really doubt MS has stranglehold on these people. <br>
      It's always been this way...if a better product that people clearly want more was available, the infrastructure to get them out the door would happen overnighte. Or are you saying the iPod didn't have a mature market in which it entered? I could name any number of products that rise up in a matter of weeks or months in already saturated markets. It just has to be a BETTER product. Again, see iPOD.
    • Yep they are buying it for now...

      I was just upgraded to Office 2007 at work and it is horible to use. I recently bought a laptop and had to yank Vista off of it and XP I would have left on it. And finally, I am old enough to remember the days when no body gets fired for buying IBM and then came the PS2.

      In world without fences or walls who needs Gates or Windows?
      • Of course you would hate

        the most popular version of Office to come out since it's beginnings. Sure, just cause everyone is raving about it and it's ultra intuiative interface doesn't mean you'd catch on does it. <br>
        That productivity boost of an average of 80% less keystrokes/mouseclicks doesn't register with you. <br>
        And I'm sure it's not your bias....i don't see anything that tells me you are biased. you end with a lovely little quote that shows you have great taste. <br>

        "in a world filled with walls and fences, thank God we have Windows and Gates to give us a wonderful and magnificent Vista"