Is Vista to blame for Windows revenue drop?

Is Vista to blame for Windows revenue drop?

Windows revenues down nearly 24 percent from last year

Microsoft said that Windows revenues during the first three months of 2008 were down nearly 24 percent from the same period last year.

One analyst argued that the decline is more evidence that the company is having trouble convincing users of Windows Vista's value. "More than a year has passed since the rollout of Vista to both the business and consumer markets, and experiencing revenue declines so early in the product lifecycle is not a positive sign," said Allan Krans, an analyst with Technology Business Research.

Krans also compared the 23.7 percent drop in revenues of Microsoft's Client group -- the division responsible for Windows -- with a decrease of less than half of one percent for the last quarter of 2002, the period a year after the debut of Windows XP.

Microsoft tempered the 2008 revenue drop by noting that after it accounted for the free Vista upgrades it gave to PC buyers in late 2006 and early 2007, the decline was only 2 percent.

In an earnings conference call Thursday afternoon with financial analysts, Chris Liddell, Microsoft's CFO, blamed the decrease year-to-year on Vista's strong sales in the first quarter of 2007, and higher-than-expected rates of Windows piracy in the first three months of 2008.

The comparison with last year Liddell called "tough" because of the solid numbers Vista's launch added to revenues in 2007. "[And] we believe there was an increase in shipments of unlicensed PCs, particularly in Asia," he said.

Krans also pointed out that along with soft revenue figures, Microsoft continues to face perception problems regarding Vista. He ticked off several, ranging from calls by users to extend the availability of Windows XP -- which is slated to start its retirement June 30 -- to analysts' pegging Vista as "bloated" to the ongoing "Vista Capable" class-action lawsuit.

Microsoft denied that there is any connection between the lower revenues and Windows Vista. "There's really no Vista-related issues at all," argued Liddell.

"In terms of the impacts, firstly [with] the overall PC market, [there are] unlicensed PCs, which is not a Vista issue. Emerging markets growing faster than mature markets, that's not really a Vista issue," he said. "[And] a bit of a channel shift to larger OEMs, again [that's] not a Vista issue.

"The only Vista impact really is the launch last year and the very strong comparables that we have, but that's not really a comment about this quarter, it's more a comment on the year-ago quarter and the comparable," Liddell added.

Michael Silver of Gartner isn't sure any comparisons with XP are fair. "Because XP made the holiday season in 2001, everything is really just a bit off," said Silver in an e-mail.

Windows XP was launched near the end of October 2007; meanwhile, Microsoft rolled out Vista to volume licensing customers in late November 2006, but didn't push it into wide distribution until the end of January 2007. For the quarter that ended December 31, 2002 -- a year after XP's launch -- Microsoft posted a decline in Client division revenues of four-tenths of one percent, about one-fourth the decrease of the adjusted revenues in the one-year-after-Vista quarter just reported.

Rather than put the blame on Vista, Silver said the weak Windows revenues could instead be linked to lackluster PC sales in developed countries, where higher-priced versions dominate.

"Since Microsoft will sell more premium SKUs in developed countries and fewer premium SKUs and even Starter Edition -- which all get less revenue -- in emerging countries, stronger PC sales in emerging countries don't make up for flagging PC sales in developed markets," he said.

According to Microsoft, it's sold 140 million Vista licenses so far.

Follow Us

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.




Channel kicks 2021 into gear as After Hours returns to Auckland

Channel kicks 2021 into gear as After Hours returns to Auckland

After Hours made a welcome return to the channel social calendar with a bumper crowd of partners, distributors and vendors descending on The Pantry at Park Hyatt in Auckland to kick-start 2021.

Channel kicks 2021 into gear as After Hours returns to Auckland
The Kiwi channel gathers for the 2020 Reseller News Women in ICT Awards

The Kiwi channel gathers for the 2020 Reseller News Women in ICT Awards

Hundreds of leaders from the New Zealand IT industry gathered at the Hilton in Auckland on 17 November to celebrate the finest female talent in the Kiwi channel and recognise the winners of the Reseller News Women in ICT Awards (WIICTA) 2020.

The Kiwi channel gathers for the 2020 Reseller News Women in ICT Awards
Show Comments