How Will Microsoft Grow Windows Sales?
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Five years of anti-piracy work is starting to pay off for Microsoft, says Kevin Johnson, president of the platforms & services division. |
Earlier this afternoon, Johnson explained anti-piracy and other sales expansion efforts during the UBS Global Technology & Services Conference. The Microsoft division president put the sales expansion efforts in context of the company's 2008 fiscal first quarter results, which exceeded guidance by more than $1 billion.
Microsoft started the millennium with two advancing trends:
- Slowing PC sales in established markets and increasing shipments in emerging markets.
- Consumer PC shipments outpacing those to businesses.
By coincidence or design, Microsoft efforts to resolve both problems reached a crescendo during the fiscal first quarter—or the second full quarter of Windows Vista sales.
"PC shipments will be in the 10 to 12 percent range," during Microsoft's 2008 fiscal year, Johnson said. Shipments favor stronger consumer growth, in the 14 percent range, and weaker business growth, closer to 10 percent, he said.
From a revenue perspective, "We have lower price points on the consumer side than on the business side," which Johnson said could put "downward pressure on revenue."
"The second dynamic is the shipment of PCs into emerging markets versus developed markets," Johnson said. "We think [there will be] roughly 20 percent growth of shipments into emerging markets versus 8 percent growth of PC shipments into developed markets." Johnson acknowledged that because of high piracy rates in many emerging markets, shipments of "genuine Windows" would be lower.
Johnson estimated PC shipments of 260 million to 265 million this year; I presume he means Microsoft's fiscal 2008, which ends on June 30. Johnson estimated that the "attach rate for genuine Windows" is in the "40-to-80 percent range," depending on the market—higher in developed markets and much lower in emerging ones.
Still, Microsoft's anti-piracy efforts, in both emerging and established markets are "starting to pay off." Johnson spoke about "creating a formula on the global basis" through technology and policy efforts.
Some of those efforts offer mixed benefits. While "we like to have a broad, healthy channel dynamic," a shrinking Chinese white box market would likely increase distribution of legally licensed copies of Windows, Johnson said.
Microsoft has offset some of the revenue loss from piracy and increased consumer PC demand by shifting the mix of Windows sales to "premium" SKUs, particularly among businesses in established markets. He said the premium SKU mix and efforts around Windows Genuine Advantage "more than offsets" Windows revenue weakness from piracy and consumer PC sales.
Another important factor affecting Windows revenue growth is volume licensing. There, Johnson made a startling admission. "Certainly having a five-year cycle between Windows XP and Windows Vista did not help. And as a result, over that period of time, we saw continued decline in the Enterprise Agreement Software Assurance revenue stream for Windows."
With Windows Vista, Microsoft introduced the "Enterprise Edition, which is not available through other channels," Johnson said. Businesses interested in Vista Enterprise must have Software Assurance to obtain it. Johnson referred to this strategy as increasing the "value proposition" for Software Assurance.
Some Microsoft customers might look at it as the sign-or-you-die requirement: no Software Assurance, no Windows Vista Enterprise. The choice is sign on the dotted line or blow your collective IT organization brains out.
The strategy is working, and Johnson sees the "significant uptake" in Windows Software Assurance sign-ups foreshadowing big changes ahead. During fiscal first quarter, Windows Software Assurance revenue surged 27 percent.
"We are nearing the end of the early adoption phase of Windows Vista," he said. For businesses looking to deploy Vista, "first thing they do is sign up for Software Assurance."
He emphasized: "Customers would not be buying if they didn't have intent to deploy."
Looking ahead, Johnson sees no dark horizon from the clouds of macroeconomic uncertainty.
"We are not seeing a slowdown in enterprise demand across the product line," he said. "Customers want to operate more efficiently when times are good and they want to operate more efficiently when times are bad."
Related Posts:
- What Is the Vista Experience?, Microsoft Watch, Nov. 14, 2007
- Vista Adoption Will Continue at Slow Pace, Microsoft Watch, Nov. 14, 2007
- Vista's Consumer Rocket Ride to the Enterprise, Microsoft Watch, Nov. 8, 2007
- Vista: One Year Later, Microsoft Watch, Nov. 8, 2007
- Microsoft's 'Get Legal' Program, Microsoft Watch, Oct. 2, 2007
- If Not Vista Enterprise, Then What?, Microsoft Watch, Aug. 21, 2007
- Vista Pushes Volume Licensing, Microsoft Watch, July 26, 2007
- Microsoft Software: Rent Me, Microsoft Watch, July 20, 2007
- Software Assurance Storm Warning, Microsoft Watch, July 9, 2007
Comments (12)
With silver bells and cockle shells
And pretty maids all in a row?
Or they could start by selling "products of lasting value". That was the creed of the pre-Carly Hewlett Packard Co., a place where two kids named Jobs and Wozniac drew paychecks. Two guys named Gates and Ballmer never worked there.
Posted by Mary | November 15, 2007 6:44 PM
Its hard to see a case for worry here. Consumers will continue to gravitate to Vista at a fast pace, the current 90 million installed base of Vista users is the first push. The recently surveyed CIO's in North America and Europe are the second push for Vista and this will create a cycle between more consumer and corporate upgrades.
- Clients using Vista at home, demanding it in the work place.
- IT Pros and CIO's seeing the value in Vista's productivity tools and security benefits.
- Streamlined experience with Server 2008 and Vista, secure, powerful network for collaborative experiences.
These are drivers for continued adoption of Vista and of course SP1 which will add extra incentive to make the operating system more deploy friendly for most organizations.
We need to take into account also the realistic upgrade cycle of many organizations around the world too. A Company where I worked didn't start deploying Windows 2000 until Summer 2003, that same Company didn't start deploying XP until late 2005.
So give or take, most adoption cycles happen within 2 to 3 year time frame. This cycle will continue for future releases of Windows client, its just inevitable, but the point remains that the majority of Corporations and consumers will eventually upgrade to a new release of Windows.
Posted by Andre Da Costa | November 15, 2007 8:16 PM
The anti-piracy efforts are also helping Linux and FOSS adoption, especially in price-sensitive markets. After all, if you're trying to fight piracy, then why not use software that can't be pirated and which is free?
I'm in the process of introducing OpenOffice to around 50 employees in a top resort. The reason for dumping M$ Office? Cost. OpenOffice gives them all the features they need but it doesn't cost anywhere near as much. Even with training it costs much less. I was told that they are alrerady running Linux on some servers and are planning to migrate desktops and more servers to Linux.
Posted by Maddog | November 16, 2007 5:01 AM
Can anyone put two and two together?
Microsofts Global Sales Expansion Strategy includes .Net Framework as part of their tech
but..................
FRIDAY, APRIL 20, 2007
Vertical Computer Systems, Inc. Files Patent Infringement Lawsuit Against Microsoft Corporation
Fort Worth, TX, April 20, 2007 (PRIME NEWSWIRE)? Vertical Computer Systems, Inc. (OTCBB: VCSY)(www.vcsy.com) announced today that on April 18, 2007, Vertical Computer Systems, Inc. filed suit for patent infringement against Microsoft Corp. in the United States District Court for the Eastern District of Texas. VCSY claims that the Microsoft .Net System infringes U.S. Patent No. 6,826,744.
Posted by I-Man | November 16, 2007 6:06 AM
"its just inevitable, but the point remains that the majority of Corporations and consumers will eventually upgrade to a new release of Windows."
Unless they switch to something else. Can't happen? Sure, just like the U.S. dollar can't lose half its value in five years...
Posted by Penny | November 16, 2007 11:49 AM
I gotta agree with the "naysayers" on this one. Few consumers will upgrade from XP or 2000 -- most computers running XP or 2000 do not have the memory or CPU speed needed for Vista. Consumers will stay on what they have until it no longer does what they need. At that time, they will buy a new machine, likely a laptop with Vista but also possibly with OSX or Linux.
As for "consumers using Vista at home and demanding it at the workplace," that depends on what the consumers experience. So far, the consumer experience seems to be more akin to "WTF?!" than to "Wow!!". Unless the Vista experience gets a lot more compelling, I don't see this happening.
Most of the "IT Pros" at my day job, Systems Engineer for a Fortune 100 company, are running Linux on their computers at home. Windows is what they do for money. Linux is what they do for fun.
Same at my night job. I'm an adjunct CS instructor at a small, private university. One of the IT guys for the school sits in the back of my "Networking" class. He had his personal laptop running during a lab. I took a peek to see what was up. He was running something I had never seen, an app called lanmap under Ubuntu. For me, it was a "Wow!" I gotta have that! (It's a geek thing, I guess. ;) IT had the MAC of someone who had been attempting to hack servers from the student wireless LAN during evening classes. He was watching the wireless activity so that they could locate and ban this person.
He says that most of the IT guys are running Linux on their own computers and most of the school's servers -- except for Exchange -- have been switched to Linux or BSD. So, again, I don't see IT Pros driving a switch to Vista.
"Some Microsoft customers might look at it as the sign-or-you-die requirement: no Software Assurance, no Windows Vista Enterprise. The choice is sign on the dotted line or blow your collective IT organization brains out. "
There is another choice ... make the switch. At what point do you stop paying money to a guy holding a gun to your head? The guy with the gun can't take out everyone in IT. IT will take some casualties but the collective IT organization will survive and will never again have to face "sign-or-you-die."
Penny: "Can't happen? Sure, ...."
Oldtimers like me lived through such a "sea change." It happened in the late '80s and early '90s. At the beginning of this era, IBM owned about 90 percent of the market. At the end, minicomputers running VMS or a variant of Unix were "king." Can't happen? I've seen it once and my "gut feel" says that I'm seeing the start of it again.
Posted by Karl | November 16, 2007 3:35 PM
You gotta love M$ efforts in fighting piracy in underdeveloped countries. Take Russia for example, here when Bill Gates was asked for lenentacy for a Russian Schoolteacher who installed Windows (pirated) on school computers, Bill answered mostly that the case had nothing to do with him. Nice Guy. But it serves M$ right now, that the whole Russian School system is converting to Linux.
Posted by chips | November 16, 2007 6:12 PM
The title of Joe's article asks the question:
"How Will Microsoft Grow Windows Sales?"
The answer is simple, thru it monopoly position of preinstalls, its use of lockinware (all ms products), and raising prices on Windows and Office even during a period of declining market share.
Here is a link titled:
How Microsoft Is Selling Out the Public to Please Hollywood
its an older article from 2005, but just think Vi$ta as you read it. Some of you may remember the heavy cpu loading of DRM that is embedded into the core of Vi$ta, to supposedly let you play Sony Blueray and Toshiba HD-DVD disks. The funny thing is that 99% of the computers sold do not have these drives. And how many TV cards will work with Vi$ta these days?
http://copyfight.corante.com/archives/2005/07/27/how_microsoft_is_selling_out_the_public_to_please_hollywood.php
Quote from the link: "Over @ Deep Links, Seth Schoen, EFF's trusted computing guru, has just completed a four-part series on Microsoft's security and lockware strategy. His latest post, Microsoft Sells Out the Public on CGMS-A, explores how the company is collaborating with Hollywood to keep "attackers" from exercising their fair-use rights"
Posted by chips | November 17, 2007 2:01 PM
The title of Joe's article asks the question:
"How Will Microsoft Grow Windows Sales?"
M$ will continue to make more money, duh. But its market share on the desktop has started to decline. And this is just the trend. Sort of Fall and Decline here people. It may take awhile, but the trend has started.
Posted by chips | November 17, 2007 11:00 PM
"Make the switch"
It sure isn't the first time we hear that. It's often easier said than done and it'll be this way so long as there won't be more support from hardware and software makers. I'm sure that for many, it would be a possible avenue but it depends on what's needed. For example, at my work place, Linux is unthinkable since we use many specialized software that only run on Windows (except Vista).
Personally, I tend to think like Andre. Heavy adoption of Vista will come with time, once it will become more stable and that the major compatibility problems will be solved. It's like a natural thing. How long before it happens, if it ever happen? Now that's the question.
As for how can MS grow Windows sales, well how about lowering the price? All that anti-piracy crap is pointless as there'll always be someone to get through it in no time.
Posted by Ryannoyed | November 17, 2007 11:31 PM
I had a "Wow" experience yesterday. My wife is a SW Engineer. Her day job is developing in C++/SQL using VisualStudio .Net. She's also an "adjunct" and teaches C++ (using VisualStudio as the IDE) at night. She uses her laptop heavily in her teaching. She has VisualStudio and tons of code and debugging examples on it. Seeing the price for an LCD replacement, she decided to replace the laptop rather than repair. She found a gorgeous dual-core 64-bit Athlon Toshiba at NewEgg for $700. It arrived at work Friday and came home on Saturday.
First time out of the box it booted to a Microsoft EULA. It came preloaded with Vista Home Premium (inexplicably, a 32-bit edition). She said, "How do I get this crap off? I will never use this 'big brother' spyware! Can I buy that extra XP license off you?" (I picked up a spare XP Pro SP1 license from CompUSA cheap after SP2 came out).
Being that she's a VisualStudio .Net developer, I figured she was something of a softie. I was surprised to hear that level of emotion directed against Vista.
So, long story short, power button, F12, boot Darik's Boot and Nuke (DBAN) from CD. Vista is history. Next boot, Windows 2000 CD and a minimal install. Third boot, XP Upgrade. I kindly formatted a 140 GB NTFS partition for her XP but left 20 GB for 64-bit Ubuntu.
I think this blows Andre's "IT Pro" theory. I'm going to bet right now that when MS drops support for XP, the next generation of students will be learning C++ using eclipse and linux.
Posted by Karl | November 18, 2007 9:47 AM
My visa was just used to purchase 4 worth of something in Czechoslovakia, then 1500 worth of diamonds in Spain. Holy crap. She said it's nothing that I've done wrong, that the Evil Thieves are able to get credit card numbers from literally anywhere (like, for instance, the huge database theft that hit the parent company of HomeSense, where hundreds of thousands of visa billing records were stolen, likely a few of mine in there as well).
Posted by TrustedID.com | May 2, 2008 10:17 AM