Ballmer to Wall Street: Temper your Windows Vista projections

Microsoft CEO Steve Ballmer told Wall Street analysts and shareholders that many of their projections for Windows Vista were "overly aggressive."
Written by Mary Jo Foley, Senior Contributing Editor

Microsoft CEO Steve Ballmer told a group of Wall Street analysts and shareholders that many of their projections for Windows Vista were "overly aggressive."

Ballmer made his remarks during a forecast-update meeting with Wall Street analysts on February 15, Ballmer wasn't sounding a sales-warning alarm so much as he was trying to talk Wall Street down, in terms of their expectations for growth from Microsoft's Windows client business.

Windows client still remains the biggest component of Microsoft's revenues, and will likely be so through Microsoft's fiscal 2010 Ballmer said. (Microsoft's fiscal year commences on July 1.)

Microsoft had projected its client division to postgrowth of 54 percent to 56 percent in the current quarter, but some analysts called that projection conservative and raised the revenue growth bar.

"There's a disconnect between what people think is the growth of the PC market and Vista growth," Ballmer told analysts. Analysts either need to increase their projections for both the PC market and Vista sales, or realize that "the two things (PC growth and Vista sales) are out of whack.

Ballmer said he was glad there was so much enthusiasm about Vista, but cautioned that Vista's primary purpose will be to "sustain the Windows growth that Microsoft already had."

"PC growth will be buoyed by Vista," Ballmer elaborated, but it won't lead to anything even approximating double year-over-year PC growth.

Ballmer told analysts that Microsoft is expecting priacy reduction to contribute to the growth of its Windows business, but that's "not a huge thing in this scale of the business." He also reminded analysts that Microsoft already has sold a lot of corporate volume-licensing upgrades, so analysts shouldn't be counting on huge untapped demand from larger corporations when calculating Vista sales projections.

Some analysts had already begun tempering their projections yesterday.

On February 14, Stanford Financial Group analyst Neil J. Herman said in a research note that "While Windows Vista had a fairly strong showing in the first week of its release, we would not be surprised if the surge in sales was a blip upward related to near-term pent-up demand of early adopters that may well have already been satisfied to a significant degree."

"Feedback we have received indicates that businesses and many consumers continue to request XP instead of Vista on machines that are widely advertised as being shipped with Vista. This may be a blowback from bugs in XP at the time of its release," the Stanford Financial research note added.

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