Microsoft Sees Strong Sales of Windows XP Starter

By Peter Galli  |  Posted 2005-07-28

Microsoft Sees Strong Sales of Windows XP Starter

REDMOND, Wash.—Microsoft Corp. has sold 100,000 copies of its Windows XP Starter Edition software, designed to meet the needs of first-time users in emerging markets.

Will Poole, the senior vice president of the Windows client group, told attendees here at Microsofts annual financial analyst meeting that the company is growing its portfolio of products and that the XP Starter Edition had so far been introduced into 22 countries and in six languages.

Click here to read more about the Windows Starter Edition.

Poole opened his presentation by noting that he was making an unusual announcement for Microsoft, which was that it was ahead of its schedule for Windows Vista, and that "my goal is to keep us ahead of schedule. The client team has had a very good year so far," he said.

David Coursey takes readers on a tour of Windows Vista. Click here to view the slideshow.

"We [the Windows client business] grew by 6 percent in the last fiscal year to $12.2 billion, with strong growth reported in China and Latin America. As the client side of our business is very OEM-driven, with some 80 percent of our client business coming from there, we were pleased to see that grow by 10 percent last year," Poole said.

Microsoft is also considering trials with some of the telecommunications companies that offer broadband to give first-time users rapid connectivity and a PC starting at a low cost—about $15 a month—Poole said.

On the downside, there has been a 9 percent decline in the Windows client units annuity licensing revenue, which was largely based on uncertainty about timing of new operating system releases, he said.

"Clarity around Windows Vista and its availability timeframe will accrue to our benefit as customers continue to sign multiyear licenses. We do not expect to see this decline the way it did in 2005," he said.

The team will also continue to drive segmentation in the marketplace and have specific products for specific segment groups that would drive revenue and growth, he said.

Microsoft is also looking at ways to recapture revenue, including reducing piracy rates. Its Windows Genuine Advantage program, announced earlier this week, is one key element of that strategy.

Microsoft will continue to emphasize the security in Windows Vista, he said, adding that the adoption of Windows XP SP2 by users has been strong.

But the Windows client business has faced its share of challenges, Poole said. By far the biggest of these is its past success. "The Its good enough syndrome is one that we are aggressively going after as these users are running code from five and 10 years ago that is still working fine for them We have to show them why upgrading is even better for them," Poole said.

Click here to read what Ballmer says are the biggest challenges facing Microsoft.

While open-source software is a competitor and is seen by many as a significant threat, it was not more cost-effective in most cases during the past fiscal year. "We are seeing the 24-hour Linux syndrome, where a customer installs a free copy of Linux and within a day downloads a pirated copy of Windows onto their system," he said.

Next Page: To buy or not to buy Windows, that is the question.

Microsoft Sees Strong Sales of Windows XP Starter - Page 2

Turning to what the drivers were to those people considering buying a new operating system, Microsoft found that compatibility topped the list and that those customers wanted issues around application and driver compatibility to be addressed.

Also high on the list were features that enabled productivity and new scenarios, with security, quality, costs and brand availability also important, he said.

Turning to the enterprise, Poole said these users wanted to get more down, more effectively and efficiently. "We believe we can deliver increased efficiency. IT managers are also looking at driving down costs, and Windows Vista could knock as much as 25 percent off the annual management cost of a Windows Desktop solution," he said.

Looking ahead, Poole said that Microsoft will continue its developer engagement at its annual Professional Developer Conference in September, while Beta 2 will have end-user engagement and be followed by broad availability in the second half of 2006.

"In fiscal year 2006, the client group expects revenue growth of between 5 and 6 percent year-on-year, the OEM channel is expected to continue to drive growth, and a 7 to 8 percent growth in PC shipments is expected," Poole said.

Next up was Jeff Raikes, the group vice president of Microsofts Information Worker Business, who said that revenue grew 3 percent to $11 billion in fiscal year 2005, with some 63 million new and renewed Office licenses entering the market.

While the year entailed much talk about competitive open-source software like Sun Microsystems Inc.s StarOffice and OpenOffice, "We sell more Office solutions per week than total annual sales for solutions like OpenOffice and StarOffice, Raikes said.

The Information Worker Division expects higher growth in fiscal 2006, even though this was the third year for sales of Office 2003. The release of Office 12 is also in the works, he said.

"Our mission is to broaden the audience of information workers who use and value our software. To do this required transforming the business, which meant increasing the number of programs, servers, services and solutions we have. We did that with Office System 2003 and will continue to do so with Office 12," Raikes said.

Click here to read about the new scenarios Office 12 will bring.

Office 12 was the most significant version of Office ever, and with that came an opportunity for a new Premium Edition. "We are doing research right now on how we can configure that Premium Edition. You will also see a huge amount of the Office 12 wave and opportunities at PDC later this year," Raikes said.

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