Hefty Office Sales Help Drive Microsoft Revenue

By Peter Galli  |  Posted 2008-01-28 Print this article Print

Solid growth in the U.S. retail channel helped drive sales of Office 2007 and Office for Mac, analysts say.

Microsoft's strong second-quarter financial results surprised not only analysts, but also the company's own executives by coming in $300 million above the high end of their forecasts. Microsoft also reported Jan. 24 a 30 percent rise in revenue, to a record $16.37 billion, in its fiscal quarter that ended in December, on the back of what company officials said were "robust holiday sales and enterprise demand."
That success was in no small part due to hefty ongoing sales of Office 2007 as well as strong sales of Office for Mac, thanks to retail promotions, Chris Swenson, an analyst with the NPD Group, told eWEEK.
"Office 2007 sales literally doubled the sales volume that we saw for Office 2003 during the same point in time-the first 11 months on the market.  If I look at all the dollars spent on software in the U.S. retail channel in 2007, Microsoft Office captured just shy of 17 percent of that," he said.

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There was also solid growth in the U.S.retail channel in the quarter, from Oct. 1 to Dec. 31. Black Friday week sales, in terms of dollar volume, increased 65.8 percent compared with the same period in 2006, while Office for Mac sales surged 215.8 percent due to a special $100 rebate that Microsoft ran on Black Friday and a longer-running promotion where customers of Office 2004 for Mac could get the new Office 2008 product when it was released in January for a few more dollars, Swenson said. "Clearly, those two promotions helped drive sales of Mac Office during the holidays, resulting in Office sales surging 50 percent year over year in terms of dollar volume. But Windows also performed strongly, with dollar volume up 40 percent year on year," he said. With regard to Windows Vista, sales of which have reached the 100 million shipped mark, Swenson said there was a sharp increase in the percentage of PCs that now ship with the new operating system, a number he expects to "really skyrocket when SP1 [service pack 1] is released in February." While more than 80 percent of the 100 million figure comes from the OEM channel as installations on new computers, a good chunk is for the full-packaged product. Retail data also showed that more than 95 percent of all PCs sold at retail have Vista installed. "We're seeing a dramatic rise in the percentage of PCs going out the door with Vista loaded," he said.

Peter Galli has been a financial/technology reporter for 12 years at leading publications in South Africa, the UK and the US. He has been Investment Editor of South Africa's Business Day Newspaper, the sister publication of the Financial Times of London.

He was also Group Financial Communications Manager for First National Bank, the second largest banking group in South Africa before moving on to become Executive News Editor of Business Report, the largest daily financial newspaper in South Africa, owned by the global Independent Newspapers group.

He was responsible for a national reporting team of 20 based in four bureaus. He also edited and contributed to its weekly technology page, and launched a financial and technology radio service supplying daily news bulletins to the national broadcaster, the South African Broadcasting Corporation, which were then distributed to some 50 radio stations across the country.

He was then transferred to San Francisco as Business Report's U.S. Correspondent to cover Silicon Valley, trade and finance between the US, Europe and emerging markets like South Africa. After serving that role for more than two years, he joined eWeek as a Senior Editor, covering software platforms in August 2000.

He has comprehensively covered Microsoft and its Windows and .Net platforms, as well as the many legal challenges it has faced. He has also focused on Sun Microsystems and its Solaris operating environment, Java and Unix offerings. He covers developments in the open source community, particularly around the Linux kernel and the effects it will have on the enterprise.

He has written extensively about new products for the Linux and Unix platforms, the development of open standards and critically looked at the potential Linux has to offer an alternative operating system and platform to Windows, .Net and Unix-based solutions like Solaris.

His interviews with senior industry executives include Microsoft CEO Steve Ballmer, Linus Torvalds, the original developer of the Linux operating system, Sun CEO Scot McNealy, and Bill Zeitler, a senior vice president at IBM.

For numerous examples of his writing you can search under his name at the eWEEK Website at www.eweek.com.


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