Ballmer warns against Vista optimism

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Ballmer warns against Vista optimism

New OS will not be the silver bullet that reignites worldwide PC sales.

Microsoft chief executive Steve Ballmer has warned that many industry analysts and observers are "too bullish" about the importance of Windows Vista to the company's future revenues.

"Some of the revenue forecasts I have seen for Windows Vista in fiscal 2008 are overly aggressive," Ballmer said at Microsoft's latest financial analyst conference.

His remarks caused a 2.3 per cent drop in the company's stock price on Friday.

Sales of shrink-wrapped Vista CDs will be limited to the first few months following the launch of the operating system as a small group of consumers buy the software to upgrade existing systems, but this is likely to drop off, according to Ballmer.

The bulk of Windows sales growth is directly linked to the increase in new computer purchases, but forecasts for Vista's revenue opportunities in this area are looking rather grim.

Enterprise PC sales are diminishing following corporate decisions to lengthen PC refresh cycles.

Most enterprises also have long-term sales contracts with Microsoft through its Software Assurance program that entitles them to free upgrades.

"I think people might underestimate the degree to which we already have a very strong base of Enterprise Agreement bookings … that essentially include Windows Vista," said Ballmer.

Growth will therefore have to come from emerging and consumer markets. While these segments can deliver an overall boost to the volume of software licences sold, they cause a drop in Microsoft's average revenues because consumer versions of the software are cheaper than enterprise versions.

Ballmer also predicted that Microsoft will sell more software in areas that he referred to as "high piracy markets". Windows Vista offers new technologies that render systems running pirated copies useless.

But he also warned that the overall benefit of this programme will be limited, as overly aggressive anti-piracy measures affect customer satisfaction and could drive users to competing operating systems.

"I think that this will bring some revenue growth. I still don't count on it to be a huge thing on the scale of this business as we really ferret through how far we can dial it up, and what that means for customer experience and customer satisfaction," said Ballmer.
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