Early Vista Sales Don't Tell the Whole Story

This week, NPD released limited channel data for Windows Vista licenses sold to businesses through resellers like CompuCom, Softmart and Software Spectrum. The data suggests that early Windows Vista license sales are stronger than Windows 2000 license sales were, but slightly weaker than Windows XP during the first month of availability. But the limited available data doesn't reveal enough to determine how well Windows Vista really sold or will sell in coming months.

Chris Swenson, NPD's director of software industry analysis, said he had initially lowered his expectations for Vista license sales because of Microsoft's "soft launch." On Nov. 30, Microsoft released the software to businesses through volume licensing, but the larger launch occurs in a few weeks. New Vista PCs--new PCs being the main means by which Windows is acquired--go on sale Jan. 30. The gap between the two launches means no "marketing cover" to churn up sales, Swenson said.

"I would have expected commercial sales to be somewhat weaker until Jan. 30, when Microsoft launches the retail version to consumers and the Microsoft marketing machine kicks in," Swenson explained. "However, Vista did somewhat better than I expected."

Measured in dollars, not units, Vista's December 2006 sales were 62.5 percent higher than March 2000 sales of Windows 2000 and 3.7 percent lower than November 2001 sales of Windows XP, according to NPD. Average selling prices for Vista were 4.4 percent higher than for Windows 2000 but about the same as XP.

Unfortunately, the comparisons don't tell the whole sales story, because of mitigating factors. For example, Windows 2000 and Windows XP were also available on new PCs--and to all customers--during early sales, whereas Vista is not. Additionally, the comparisons reflect the first month of Vista license sales, but not those for the other operating systems.

Windows 2000 PCs went on sale Jan. 24, 2000, or about three weeks ahead of the Feb. 17, 2000 launch. I don't recall volume licensing availability. PC manufacturers started selling Windows XP systems in September 2001. Likewise, the software was available through volume licensing for about a month before the late October 2001 launch. So, the March 2000 and November 2001 comparisons reflect a different sales period than does December 2006.

Swenson agreed that the comparisons aren't perfect, although the released numbers are the best attempt to compare first full months. "If I were to just look at February, Vista dollars were up 427 percent over Windows 2000 in February [2000]. But that's because the VARs started selling halfway through the month in February--thus it's causing Vista to look better than it actually is."

His point: Numbers can be deceiving. Swenson explained that he "bent over backwards" to explain to a reporter from another news organization about the comparisons and interpretation. "Software is just one side of the coin," Swenson emphasized. "I look at software as a leading indicator for OS sales, and that the true test will be to look at software combined with hardware sales going forward."

I don't doubt NPD's data, just what some news stories make it out to be. Swenson released comparisons at a reporter's request; no report was published. While the information NPD releases to its clients is no doubt complete, what's available to the news media is not. NPD did not make available unit shipments, SKUs sold, ratios of upgrades versus full licenses or breakdown across volume licensing plans. In addition to the questionable comparisons, what's missing would make a huge difference in evaluating the quality of Vista early licensing sales compared Windows 2000 or XP.

To be clear: The missing information is to be expected, and I don't mean to reflect poorly on Swenson or NPD. Research firms aren't in the business of giving away information to the news media, but selling it to clients. The information provided to the press should be incomplete.

Some of the other data is interesting, even if also incomplete. NPD found that Windows 2000 Select licenses outsold Windows XP Select licenses by a 3-to-1 ratio during first full month of sales. For Windows XP, Select outsold Open licenses by a 2-to-1 ratio during the same time period. By comparison, the Select-to-Open license ratio was 7 to 3 for Windows Vista, suggesting stronger uptake for mid- and large-size businesses.

However, NPD could not release data on Open Value licenses, which Microsoft targets to smaller businesses. Through Open Value, buyers can obtain Windows Vista Enterprise or Business in groups as small as five licenses.

Swenson was clear that it's way too early to make predictions about Windows Vista sales based on the available data or what NPD made available to the news media. For example, the NPD data only reflects indirect sales through the channel, not through direct manufacturers like Dell or from Microsoft. Resellers can provide media and licenses to their customers or preload custom images on new PCs.

Predictions can be tough. In February 2000, Gartner projected that between 10 and 15 percent of Windows 95, 98 and NT desktops would be converted to Windows 2000. But businesses sales were slower than expected, with real conversion being less than 10 percent.

Swenson agreed that it's better to take a "cautious" approach. "I certainly wasn't making a call on how the OS will do overall," he explained. "My take is that Vista sales were simply better than I would have expected in its first month, given the relatively 'soft launch' approach that Microsoft took so far, with the toned down marketing, lack of advertising, etc."