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Microsoft Corp. has begun dropping the prices of some of its flagship software products, starting with the Office XP family.
The Redmond, Wash., software company on Wednesday will announce that it is cutting retail prices by between 15 percent and 30 percent on a number of products in its Office XP product family.
Microsoft is cutting the retail price of both the Standard and Professional Office XP products by some 15 percent, while also dropping the price for stand-alone applications like Word 2002, Excel 2002, PowerPoint 2002 and Access 2002 by some 30 percent.
Retail pricing before the cuts was $479 for the Office XP Standard Edition and $579 for the Professional Edition. The price reductions take effect Wednesday in the United States and Canada; they will also be rolled out globally.
While Microsoft has not announced or finalized the pricing for its upcoming Office 2003 family of products, “quite frankly we dont expect retail pricing to change from these new prices,” Dan Leach, the lead product manager for Office, told eWEEK in an interview.
That would effectively mean that customers who buy copies of Office 2003 through the retail channel when it becomes available late this summer will pay some 15 percent less than what Office XP cost when it was first released.
The latest pricing move is not a result of slipping sales, Leach said, as Microsofts financial statement for its third quarter shows that Office sales grew by 9 percent year-over-year, attributable to increased sales of Office XP.
“We are always striving to make sure customers get the right software for their needs at an appropriate price,” he said. “We want to give customers more options, bottom line. While we do take economic and other conditions into account, this is purely a customer-driven move to help price-conscious consumers benefit from the value of Office products.”
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The timing of the price cuts is interesting, however, following news that Microsoft is set to lose to Linux and open-source software a large Windows desktop contract it has with the German government.
SuSE Linux AG, IBM and the city of Munich, the third largest in Germany, are expected to announce on Wednesday that Munich has chosen Linux and the free OpenOffice.org productivity suite for its more than 15,000 desktop systems, replacing Microsoft Windows NT.
Microsoft also recently said that it may be forced to lower its software prices in the future as a result of the growth of open source. In its February 10-Q quarterly filing with the Securities and Exchange Commission, Microsoft said that the popularization of the open-source movement continues to pose a significant challenge to its business model.
This threat includes “recent efforts by proponents of the open source model to convince governments worldwide to mandate the use of open source software in their purchase and deployment of software products.
“To the extent the open source model gains increasing market acceptance, sales of the companys products may decline, the company may have to reduce the prices it charges for its products, and revenues and operating margins may consequently decline,” the filing said.
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Microsofts Leach told eWEEK that there is no link between its decision to cut Office XP prices and any threat from the Linux/open-source desktop productivity suites, but rather it followed on its decision to change its Licensing 6.0 and Software Assurance program, announced on Tuesday, which gives customers running Office under Software Assurance home use rights for the software as well.
“Clearly, coming at the same time as the improvements in the Software Assurance value focused on the enterprise and business customer, it made sense to do this now for retail customers as well,” he said.
Until now, users who installed the Office software at their workplace computer or on a laptop could not install it at home as well under the same license. Microsoft will now give those customers home-use rights for Office in the ratio of one home use right for every one Office Software Assurance license held.
In order not to make this complicated for customers, who have told Microsoft they do not want any added burden, Microsoft is avoiding the need to involve the IT manager for this.
“If the employee is eligible, they will go out to a Web site and submit their name, which will get validated. They will then have to submit a credit card number to pay a cost of goods charged at about $25 to cover shipping and handling, and we will send them a complete retail version of Office to their home, so they bypass the IT administrator at work,” Rebecca LaBrunerie, Microsofts product manager for worldwide licensing and pricing, told eWEEK on Tuesday.
The home-use rights will also apply to Microsoft Project and Microsoft Visio customers, LaBrunerie said, adding that Microsoft is giving those home users discounts of more than 30 percent on retail prices if they want to buy as many as three additional desktop Microsoft software products.
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