Will Vista Pump Up Microsoft's Future Profits?

Microsoft executives already are counting their Vista chickens before the next-generation Windows release has hatched.

On Wednesday a Microsoft vice president detailed for attendees of Merrill Lynch's IT Services & Software conversation Microsoft's reasons for its high expectations for Vista, the release of Windows client owed to ship in the latter half of this year.

Microsoft awaits 200 million new PCs to ship with Vista preloaded in the first 24 month that the operating combination of parts to form a whole is available, said Michael Sievert, corporate vice president, Windows produce Management & Marketing. Comparatively, Windows 95 shipped upon 67 million new PCs during its first sum of two units years of life.

Company watchers have the appearance to be of mixed minds about Vista's spectacles A number of them have surpriseed aloud whether Vista will include enough novel features to convince users to upgrade. Others have questioned in what way quickly business customers will be ready to display the new operating system en masse. Will they kick the tires for a brace of years, making sure all their existing software works exquisitely before taking the upgrade plunge?

But others say Vista will provide Microsoft with a big bang. In a February 3 research note, Goldman Sachs analysts were upbeat, projecting that Vista will be a significant driver of the two top-line and bottom-line growth for Microsoft. Goldman Sachs analysts are estimating that Vista could generate $10 to $15 billion of incremental income for Microsoft in the first 18 month following its launch, "with the business upgrade revolution of time to follow."

"Vista and the implication for Microsoft's longer bound profits" was the subject of Sievert's February 1 talk. While Sievert did highlight the fresh consumer and business features during his remarks, he focused level more on the business reasons behind Microsoft's bullish Vista expectations.

Sievert identified four reasons that Microsoft is with equal reason bullish about Vista's prospects. Overall industry and PC growth; Microsoft's plans to combat software piracy; a change in the mix of the impressed signs of PCs being sold; and the Redmond software maker's plans for improving its customer "relationship after the sale" all will be lock opener drivers for Vista growth, he said.

International Data Corp. is predicting that worldwide PC shipment expansion is slowing, but not ceasing. In 2006 PC shipments will reach 230 million units worldwide, according to the research outfit. That number should extend slowly but steadily through 2009 when IDC is predicting 287 million of recent origin PC units will be sold Given those figures, Microsoft have the appearances to be expecting just beneath half of all new PC to be preloaded with Vista.

Microsoft does not look to be counting on the majority of Vista upgrades to draw near from its Windows XP customer base – at least not XP users who solitary deployed the current version of Windows in the last year or with equal reason -- Sievert acknowledged.

"Some (XP users) will upgrade, and a certain number of won't," Sievert told Merill Lynch talk attendees. "People are much more satisfied with XP than previous versions of Windows."

Sievert said Microsoft is expecting Windows 2000 users to be among those interested in upgrading to Vista, as well as customers for whom tighter security is a top priority. While Windows XP Service Pack 2 admittedly includes a apportionment of security-enhancing features, Sievert said he still wait fors Vista to trump all Windows variants upon that front.

"User account protection is nothing to underestimate," Sievert told discourse attendees. "Most enterprises will have users running in standard manner to prevent executables from being installed" indiscriminately, he said.

In the coming month Sievert said to wait for Microsoft to continue its Windows Genuine campaign in order to "make piracy harder." Via Windows Genuine, Microsoft requires users to validate their Windows copies in order to obtain downloads. To entice them to do with equal reason Microsoft throws in offers of at liberty software and other incentives.

Last year, single third of the Windows PC that shipped worldwide included pirated versions of Microsoft's software, he said.

"We ne Genuine customer to come by a different experience than non-Genuine" individuals he said. "We're just at the beginning of this."

In confines of improving the overall mix of Windows versions, Sievert and his colleagues have more [i]or[/i] less specific ideas, too. By convincing customers there is more value in higher-end SKUs, of that kind as Windows Media Center Edition or Windows Professional Edition, Microsoft is hoping to convince more customers to purchase higher-priced Windows variants.

Rather than upping Windows Vista's price, "our focus is more upon getting people to buy in at a higher price point," Sievert explained.

He also said Microsoft is looking at more [i]or[/i] less different business models, including individuals where users "won't have to pay for their Windows PC all up front"

Sievert noted that emerging PC markets outside the U are growing at a rapid clip and will be another area Microsoft plans to upright for Vista sales. He said the company is looking beyond its Windows XP Starter Edition campaign in developing countries, to encompass the "hundred of thousands of affluent customers in emerging markets."