Analysts Predict a Better 2008 for Microsoft

Analysts expect Windows Server 2008 and Vista SP1 to help drive product sales over the year.

Analysts expect 2008 to be a better year for Microsoft than 2007 if the company can overcome the generally poor market reaction to the introduction of Windows Vista.

The upcoming launch of Windows Server 2008 and the release of Windows Vista Service Pack 1 could help improve overall market perceptions of the operating system in 2008, the analysts said.

"Right now the buzz around the upcoming Windows Server 2008 is very positive and there appears to be huge demand for the product, which has resulted in some rather impressive deployments of the beta. I'm expecting strong numbers from that offering," Rob Enderle, an analyst at the Enderle Group, told eWEEK.

That, along with the expected release of Vista SP1 in the first quarter of the year, could turn things around on the product side for the software maker, he said.

"Next year could be a really strong one for the company given the lack of major litigation, their focus on implementing open-source concepts and being standards compliant, and their product improvements. But without marketing stepping up to the challenge, I think they'll fall short of potential," he said.


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While Directions on Microsoft analyst Michael Cherry agrees that adoption of Windows Server 2008 should be good, he points out that it will be somewhat tempered by the lag in releasing Windows Hyper-V. "It will be interesting to see how Hyper-V fairs as Microsoft's first entry into the hypervisor market," he said.

Microsoft also needs to address the perception issues customers have about Windows Vista in 2008, Cherry said. "I don't think Vista is as bad as Microsoft has convinced people it is. The first service pack will help," he said.

But the most effective way for Microsoft to change perceptions would be to discuss the next version of the operating system, currently referred to as Windows 7, and what it will do, he said.

"Customers want to know if Windows 7 will simply be another 'new' version of the operating system, or if it will fix the Vista problems, such as its excessive hardware requirements. While the new Windows management team might prefer to keep their cards close to their vest, the concerns about Vista won't go away in a vacuum of information about where Microsoft plans to take the product," Cherry said.


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While 2007 had just been an average year for Microsoft, the software maker fell short in two main areas: firstly, for failing to convince customers of the value in Vista and not addressing the confusion over the multiple editions of the product, all with differing features and, secondly, having to extend the warranties of Xbox due to multiple failures, resulting in a charge of more than a billion dollars against earnings, he said.

"I know that Xbox is not an enterprise product, but it raises the question of what happened to the testing. How did a product with so many problems get released? Did Vista suffer from the same lack of focus on quality? Many of the problems people are having, and which are being addressed in SP1, like slow copy times and oddities in the behavior of the display sub-system, had to have shown up in beta testing, but appear to have gone unresolved," he said.


For analyst Enderle, the biggest issue in 2007 was Vista's market belly flop and having businesses hold off adopting it. "Microsoft also allowed Apple to disparage Vista to a level I have actually never seen before. I frankly can't understand why any company would allow another company to disparage them this broadly without responding," he said.


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But, on the positive side, Microsoft did make a good number of acquisitions in 2007, it got through the European Union antitrust appeal without taking critical damage, and "they have folks more excited about Windows 2008 Server—which hasn't even shipped—than any product I've seen them do in years. Xbox also remained the market leader for most of the year, and they even brought out the really innovative Surface product," he said.

Looking forward to 2008, Microsoft would continue making acquisitions, and is likely to go after "anything that will limit Google's expansion and shift the momentum back to their areas of competence," Enderle said. There will also likely be "some additional moves in terms of media alliances like the Viacom deal as they move to aggressively aggregate content as a solid block to the scary level of power that Google is trying to build," Enderle added.


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