Vista: 40 Million Sold
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Bill Gates has a real knack for delivering big news in a small way. The Microsoft chairman could have been ordering hamburgers when telling the WinHEC audience the company had sold close to 40 million copies of Vista. |
Gates revealed the news during the opening keynote of Microsoft's annual Windows Hardware Engineering Conference, which started today.
"As of last week, we've had nearly 40 million copies sold, and so that's twice as fast as the adoption of Windows XP, the last major release that we've had," Gates said.
The sales number, for the operating system's first 100 days of broad availability, represents license sales into the channel. However, the number of Vista PCs sold is probably much less.
The 40 million number has a much more credible ring than Microsoft's April proclamation of 20 million licenses sold in 30 days. The 20 million figure included coupons Microsoft offered for Vista PCs sold during the holidays.
The second 20 million is the first real indication of how well Windows Vista is selling. Because of the coupon program, the time period associated with the first 20 million license sales was longer than 30 days; more like four months. In addition, Microsoft offered two separate licenses—for Windows XP and Vista—for each PC sold during the coupon period.
David Daoud, research manager for IDC's U.S. Quarterly PC Tracker and Personal Systems, said the 40 million figure is "reasonable" if "you look at the first calendar quarter of 2007 data."
However, the sales period is much longer—going back to October because of the coupon program.
Daoud said that there were "60 million PCs sold worldwide during the first calendar quarter, of which a good 40 percent [went] to consumers (almost all Vista); 25 percent SMB (of which about 60 percent of it went to Vista if you assume small businesses are consumerlike buyers); and 35 percent spread among large accounts and public sector."
Stephen Baker, vice president of industry analysis for NPD, said that the 40 million figure "certainly seems plausible." Doing some quick shipment calculations, based on one-third of year sales, he figured Vista sales to be in the "35 to 37 million range with 3 to 5 million in the channel."
What Microsoft's sales figures don't reflect is sell-through, or how many Vista licenses have cleared the channel. They also don't reflect the number of licenses deployed by businesses.
"'Sold' does not equal 'deployed,'" said Al Gillen, IDC's research vice president of system software. "If you went out and tried to find the portion of that 40 million that went into businesses, you will find a lot of the machines have been downgraded to Windows XP, which is perfectly legit."
Numbers Shell Game
Whether sold through or deployed to, the second 20 million Vista licenses are free and clear from the coupon program's messiness. Microsoft ran the coupon program from late October through March. People buying Windows XP PCs could redeem a coupon for a Vista license after Jan. 30. Microsoft offered the licenses directly to OEMs, which could choose whether or not to offer them to customers. While Microsoft charged OEMs nothing for the licenses, some PC manufacturers charged their customers for the Vista upgrades.
The coupons created two messy situations regarding early Vista sales that Microsoft used as a public relations advantage: the spread of sales over an extra four months and shifting of revenue from Microsoft's second fiscal quarter to the third.
The sales shifting allowed Microsoft to make the bold "20 million Vista licenses sold in 30 days" proclamation. Caveats: First, as mentioned earlier, the sales period was much longer than 30 days. Second, a good percentage of those claimed Vista license sales were coupon redemptions; the PCs sold with XP licenses, which make them really XP sales.
Microsoft can argue that maybe some consumers would have delayed holiday PC sales without the promise of free Vista coupons. Maybe, but OEMs and retailers don't sell intentions. They sell PCs, and they came with XP licenses. So the 20 million number is inflated by PCs sold with a XP license and the promise of another for Vista.
The revenue shifting, or $1.2 billion deferral related to Vista, allowed Microsoft to make bold claims about the operating system's success nearly three weeks ago. In total, Microsoft deferred about $1.67 billion in revenue, also including Office 2007, from its fiscal second quarter to the third. Microsoft deferred the revenue for accounting reasons but also used the situation to gain some PR advantage for Vista.
Each Windows license has a certain accounting value based on what the OEM pays for it. But Microsoft gave the Vista coupon licenses to OEMs at no cost. So, from an accounting perspective, Microsoft split the difference of one license cost between the two licenses and deferred that half for one quarter. If, hypothetically, an OEM would normally pay $35 for Windows XP Home and another $35 for Windows Vista Home Basic, Microsoft applied the cost to both licenses and deferred $17.50.
However, only 80 percent of the deferral was related to coupons. OEMs and retailers also paid for licenses ahead of Jan. 30 that couldn't be sold until Office 2007 and Windows Vista officially launched for everyone. Microsoft deferred this revenue, too.
Bottom line: The coupon program and revenue deferral gave Microsoft two opportunities to talk up big Vista numbers. However, those sales were not near as great as Microsoft claimed because they were attached to the purchase of a Vista PC four months ahead of the operating system's broad release.
The Real Measure of Success
Gates low-key 40 million license announcement is surprising because Microsoft now has something to boast about. The sales figure is through last week, which means about 20 million Vista licenses sold in about two months—from March 1 to early May. That's no number to snicker at.
PCs sales are typically slowest during the second calendar quarter, which actually makes the second 20 million number look pretty good. Problem: That's not the comparison Microsoft wants to make; the company's measure of success is against XP.
"I don't think a comparison to when XP was released—or any other release for that matter—is interesting because too many other factors aren't constant," said Michael Cherry, Directions on Microsoft's lead analyst for Windows and Mobile.
"The more meaningful number might be to compare the run rate of PCs with XP three months before Vista with the run rate of PCs three months after Vista," Cherry said. "Even more meaningful will be the number of people using Vista on the first, second and third anniversary versus the number of people still using a legacy version of Windows."
Microsoft's XP measuring stick in some ways detracts from what arguably are brisk Vista license sales during the year's typically slowest sales period. Caveat: PC sales. There still has to be sell-through.
During Microsoft's fiscal third quarter OEM license sales growth significantly outpaced PCs, an indicator that more sales went into the channel than came out. Analyst projections for the current quarter are encouraging, but the real crunch will come in June. If OEMs and retailers start heavy discounting or quarterly PC shipments come up short, there will be a sign of much unsold Vista inventory.
I asked Gillen if the channel was stuffed or whether Vista licenses were selling through.
"The answer is yes to both," he said. "The channel is stuffed—you would expect for that to happen—but the licenses are making it through to end users as well."
Gillen said it's natural for there to be "some number of systems tied up somewhere in the channel, but I would argue that the number of systems that are found in the channel at any given moment are not substantially different than was the case with Windows XP."
If Gillen's assessment proves true, Vista's early success will be even brighter. But the operating system is not driving PC sales. Gartner, IDC and NPD all report strong notebook and emerging market sales as driving PC growth. Vista isn't pulling people in droves to stores.
Still, if Vista can pull 20 million sales during the slowest sales quarter, what can happen later on? Back-to-school season should be good for both Office 2007 and Vista, with the holidays to follow.
Meanwhile, some analysts see Microsoft as wasting too much energy touting Vista-to-XP sales comparisons when the real measure of success is one or two years away.
"I don't care who is in the pole position at the start of the race, or even the first couple of laps," Cherry said. "It is more interesting after enough time has passed to see who has what it takes to finish, and finish first."
Related Posts:
- IT Organizations: Cautious Vista Testing and Deployment, Microsoft Watch, May 9, 2007
- Microsoft Q3 2007 by the Numbers, Microsoft Watch, April 26, 2007
- Microsoft's 'Big Bang' Is When?, Microsoft Watch, April 26, 2007
- How Much Does Microsoft Make from Office 2007 and Windows Vista?, Microsoft Watch, April 12, 2007
- Uh-Oh, Vista! PC Sales Levels Are Normal, Microsoft Watch, April 11, 2007
- Consumer Inertia Holds Back Vista, Microsoft Watch, April 5, 2007
- Stacking Vista Licenses Too High, Microsoft Watch, March 26, 2007
- CompUSA Closings and Microsoft, Microsoft Watch, March 20, 2007
- Vista Sales Falter at Retail, Microsoft Watch, Feb. 15, 2007
- Who's Buying Which Vista, Microsoft Watch, Feb. 3, 2007
- Microsoft's Ultimate Disadvantage, Microsoft Watch, Jan. 28, 2007
Comments (25)
Does it even matter Joe? The point is, 40 million licenses are out there whether its the channel, consumer/business and Microsoft has the cash in their pocket. I am sensing more of that Apple OS X spirit with you every time something good comes out about MS/Vista. I bet by November when Vista hits 120 million or more licenses sold you will be beating them over the head that persons aren't actually running it and they actually reverted back to Windows NT 4 Workstation SP3.
There is an estimated 400 million registered XP users out there, does the same argument apply to those users also that only a small portion are running that OS?
Posted by Andre Da Costa | May 15, 2007 8:40 PM
I ordered a new HP notebook last week; cool to have made the count.
Posted by Albert | May 15, 2007 8:59 PM
The thing is that nobody really knows. Real usage data for Vista is non-existent and its not like anyone has much of a choice when you buy your new beige box...umm maybe Bill didnt make a big deal of it, because it isnt.
I think microsoft have destroyed any chance that the next version is going to be taken seriously. OEMs will push back on dumping the older versions (which ironically will be Vista) and users seem to be getting a little smarter and wont go thru the raw pain of a new OS again.
Posted by David | May 15, 2007 9:03 PM
Does it matter if Bill Gates himself bought a million of those copies or that every Microsoft employee will get 10 copies for a Christmas bonus? How stuffed do the numbers have to get before the emperor is revealed to be naked?
Microsoft is great at marketing and part of the big lie is repeating it over and over. Y'know like GW said you gotta keep repeating the propaganda til everybody believes it.
I can't comment on the whole world - don't know em all, but in my circle of friends, friends of friends and coworkers I know one person who has Vista. And I'm a SysAdmin and people are always pumping me for tech info/advice and nobody has asked for my help with buying a copy of Vista. I get more questions about big screen TV's and mp3 players. (sorry I don't recommend Zunes or Ipods too hip for the room)
So Vista can in theory sell a billion copies and it will be meaningless unless they actual wind up being used by a human somewhere, sometime - and not just a number on an accountants spreadsheet.
My real world take on things.....
Posted by Eugene Bentwiller | May 15, 2007 9:04 PM
Joe, have you installed your old Mac with Ubuntu?
You promise to tell us your Ubuntu's experince .
Are you still sticking to Windows Vista ?
Posted by Eder | May 15, 2007 10:23 PM
Eder wrote: "Joe, have you installed your old Mac with Ubuntu?...Are you still sticking to Windows Vista?"
Well, Eder, if I wasn't troubleshooting so many Vista compatibility problems, Ubuntu would be running on that iMac G4.
Vista has a testy disposition. I nearly booted her out yesterday after the third straight morning of VPN connection issues. For now, I'm sticking with her, but I can't say that she'll stick with me.
Joe
Posted by Joe | May 15, 2007 10:32 PM
You did the coupon thing to freakin death before, so why are you belaboring it again here? All that detail wasn't required to explain the 40M comment. You could have simply pointed to your earlier post and explained the incremental 20M. The fact that you didn't suggests that as per usual, you feel compelled to knock down any positive MSFT news while highlighting any negative.
Posted by Paul | May 15, 2007 10:32 PM
Paul wrote: "You did the coupon thing to freakin death before, so why are you belaboring it again here?"
Actually, Paul, I had been asked to write more about it, which is why there is more detail here about the financial logistics than before. Including the content here meant opportunity to dispatch with it without writing another story.
Also, it serves to contrast how much better is the second 20-million figure than even Microsoft made of it. If Microsoft wasn't so hung up on XP comparisons as the benchmark, it could really demonstrate that Vista is picking up momentum.
Microsoft killed the legitimacy of its earlier 20-million claim by using that 30-day time period. The 20-million figure over four months could have been positive, because Microsoft protected its customers' holiday investments. For free! But, instead of making that point, Microsoft got carried away with making comparisons back to XP.
I don't feel "compelled to knock down" Microsoft, as you suggest, Paul. Please read the Windows Home Server story or listen to the Windows Home Server podcast, for another perspective on approach.
Thanks,
Joe
Posted by Joe | May 15, 2007 10:46 PM
Yes, Andre, it *does* matter. What Bill Gates is trying to do is drum up excitement for Vista with his inflated numbers. By suggesting that 40 million people are actually using Vista at this moment, he hopes to persuade greater numbers to make the leap to Vista *sooner* rather than later. If the 40 million users are an exaggeration, then Gates is misleading the buying public. And that *does* matter.
It matters in one other way as well: If Gates is successful in misleading the public, then people won't wait for Service Pack 1 or Service Pack 2 before adopting Vista. As a consumer advocate, I find this deception reprehensible because I believe in protecting consumer interests and making certain that the consumer understands what he's getting into if he moves to Vista too early.
Posted by Richard | May 15, 2007 11:25 PM
Paul, Joe isn't knocking down "positive" MSFT news. He's analyzing the "news" to determine how "positive" it actually is--in other words, he's revealing the story behind the story, as any good reporter should do.
As I said previously, Bill Gates is trying to portray the news as positive when in fact there is a hidden lie behind it. Forty million Vista licenses may have been sold into the channel but there certainly are not that many actual Vista users! It is very important for readers to understand this.
Joe is doing his job, and doing it correctly.
Posted by Richard | May 15, 2007 11:41 PM
There are alot of suppositions going on with commenters here. Using "Friends of friends" or their own idea of what reality is as benchmarks.
The only thing we know for sure is that Microsoft sold 40 Million licenses in 100 days. This is money that Microsoft gets to recognize on their financial statements. Yes, it will probably take some time for people to migrate to Vista, so a key metric is how fast people migrated to XP versus Vista. That, I don't believe we know.
The coupon thing is interesting. If posters here believe that people aren't using Vista, then perhaps the redemption rate of the coupon is low. I believe that redemption rates of cashback coupons is somewhat low so I wonder if the redemption rate of a coupon for a product is lower or higher. You'd think it might be tied to demand, and if people here think the demand for Vista is low, then I'd assume that the redemption rate would be low as well even if the product is free.
But, if I were to take the opinions of commenters here to estimate the demand of Vista and correlate that to redmemption rates, then I'd be doing the "friends of friends" thing which would probably give me the wrong answer.
Posted by oguchi | May 16, 2007 11:55 AM
Just because someone purchased a computer with Vista is not really a measure of its use. I bought a laptop that came with Vista, on the first day it was available because Microsoft had made deals with certain companies so the laptop was lower than its usual price. Once I got it home, I immediately wiped it clean and installed Ubuntu. Wow! Now there's an operating system. Easy to install; no crashes; thousands of free, quality software programs; no forced upgrades; no constant nagging from the operating system's creator; no security problems; no spyware. Now, I can finally enjoy my (and it is mine!) computer.
Posted by Lee | May 16, 2007 2:11 PM
It would be interesting to know how many of the 40 million have actually 'Activated' their license... I realize that people can wait out the grace period before activating, but it would still be a decent indicator of use. (At least an - additional - indicator...)
Posted by Chris | May 16, 2007 2:27 PM
Good. More frustrated users with the "calculating time remaining moving, deleting, copying files" bug Vista users are stuck with and Microsoft has failed to address effectively in the past 3 month.
Posted by Albert | May 16, 2007 2:52 PM
Let's see, 60 million PCs shipped, and 40 million had Vista pre-installed. Wow, I'm excited. Gates is making lemonade using the only fruit available.
Posted by Ernst | May 16, 2007 3:50 PM
I just helped a customer buy a laptop computer. She is planning for this summer session (college). We chose Vista Ultimate, because it has the option to down grade to XP!!!!! I have othe custermers who woo the day they bought Vista just because of security problem and popups!!!!!! Was this not a problem that was fixed in XP???????? Yep microsoft has zinged us again!!!!
Posted by George | May 16, 2007 5:54 PM
I could have purchased a cracked Vista in China for less than $1.00. I let it bake in the sun along with the dried fish, watermellons and onions. I really don't want to buy a new computer, so I can run Vista. And most Chinese don't either. Two years from now, things will be different. Microsoft will have plenty of cracked Vistas running in China. How is that for the numbers!
By the way, my cracked XP is running fine. No problems. No need to fix what is not broken.
Posted by Bob | May 17, 2007 2:26 AM
If I were an OEM or a retailer, I'd be plenty upset. Numbers returned for Vista licensing are laughable, considering the construct. October to March benchmarking impacts quite a few dynamics: Year-end sales/purchasing for consumer and smb; 2 business quarters; Holiday; Back to School; inflated coupon mess; minor upgrades within the 5 tiered package; and the ubiquitous "forced" purchase after launch on retail PCs. Come on, who couldn't put up decent #s? They ought to post the number of copies of XP sold during the period both OEM and retail. It would indicate how many more PCs could have been sold, to the non-IT types in consumer and smb. All-in-all, I'm disappointed with all the inflation---no wonder the announcement was said to be "low-key".
Posted by JAY | May 17, 2007 4:07 AM
im having problem with vista 5 months now ,so all talk rubbish ,snow busniss
Posted by Eddie | May 17, 2007 12:53 PM
I purchased 10 Licenses for Vista for the company that I work for because we can no longer get a license for XP Professional corporate. These are NOT going to be used for Vista; we are using them to install XP on systems currently running Windows 2000(they are backwards compatible). Further more, we are not going to Vista in the near future on any of our systems.
Also, we are porting all of our in house applications to run on Linux.
I wonder how many other corporations are doing the same thing?
Posted by Brucetifer | May 17, 2007 3:34 PM
Vista is krap
The reason the numbers are high is any new computer forces the user to have it. I have it and I want to remove it and go back to XP. So do most of the users I have spoken with. How about an assesment of user satisfaction? How about describing the software and device driver problems.
Not even getting to those machines sold with XP on them with a free "downgrade" in functionality to Vista.
Give it a rest, Vista sales would be tiny if people had a choice... This product is a Ford Pinto My next operating system will probably be Linux, as for the 2nd time in a row, microsoft releases krap into the marketplace and it won't stop floating till service pack 1 in another 6 mo or so.
Go to hell microsoft
Posted by Peter Em | May 17, 2007 4:53 PM
40 million "sold"
right... how many willingly bot it or was it
forced on them? how many users are satisfied with vista? maybe a few hundred? \How many companies migrating to vista... ummmm zero,
so we will say 39.2 million is puffery.
stick with XP or go mac or linux
Posted by peter em2 | May 17, 2007 5:00 PM
Microsoft's vulnerability is the stock market. Most of what Bill Gates and Steve Ballmer say or do is to maintain stockholders hooked on the Microsoft trade marks, Windows and Office. That is all MS has, and Windows Vista is the least convincing of all products so far. For an enterprise with hundreds of billions in market value, it is too little inherent value.
Onassis was wealthy because while his company was making a few ships he borrowed money on the existing incomplete ships to acquire materials and personnel for more contracts. He made smart use of existing, solid, palpable assets to serve as basis to grow. IBM is wealthy because its business is based on a solid tripod: hardware, software and services, all of good quality.
Microsoft has only software and talk, because its services are poor: just watch how bad are Hotmail, MSN, Windows Live, etc., probably due to low credibility. Corporations prefer to bet their publicity on Google rather than on Microsoft, because they don't want to feel guilty by association. MS's software is poor, due to earlier violations of basic rules of software engineering for the sake of marketing. The MS technical employees are doing their best, but that is not enough. The only thing that MS can do is talk, in order to build up expectations for a brighter future, and make stockholders happy. MS is a convicted monopolist but was not punished, so it continues to lie consistently, because it cannot be prosecuted again for the same crime (double jeopardy). It has capable accountants who build an account history consistent with management lies, in order to defend the top management against the Sarbannes-Oxley audits when they happen. If MS keeps stockholders happy, it will be possible to maintain all else at bay: journalists, customers, GNU/Linux, the SEC, the DoJ, etc., so it thinks.
However, the number of people who believe that this dangerous situation cannot continue forever is growing, and the number of people who accumulate negative experiences with Windows Vista is growing. People are smarter than spider monkeys, regardless of what Bill Gates thinks, and when most realize that they have been fooled and mocked, they will drop Microsoft from their lives. Just wait and see.
Posted by M. Miyojim | May 20, 2007 8:03 AM
It seems M$ is using channel stuffing on the Xbox as well;
http://www.informationarbitrage.com/2007/04/microsoft_phili.html
Posted by chips b malroy | May 22, 2007 2:40 AM
when is microsoft going every thing possiable for vista to down grade on all machines ..
its time for another massive class action law suit ***
make vista down gradeable on all machines !!!.
yous a microsoft only understand court orders i know this ..
do mwe need demonstations in the street.. how about pickets infront of frys , circuity city and best buys ..
make a vista dwon grade advisor now .
MICROSOFT STOP HURTING THE BUYERS THE PUBLIC WANT XP ON THERE NEW COMPUTER OR A DUAL BOOT ....
VISTA IS a THE MILINIUM EDITION OS FIEASCO ALL OVER AGAIN !!!....
LETS GO BEYOND BACK LASH LETS HAVE A WIP LASH VISTA IS NFG .. SHOUT IT OUT LOUD VISTA IS NO GOOD.
SHOUT THIS SO LOUD THAT DEF WIL GATES WILL HEAR AND HEED THE PUBLICS REQUESTS...
Posted by krass-master | December 28, 2007 6:51 PM