RSSCan Vista Be Credited With Microsoft's Stellar Q1 Gains?
By Scott M. Fulton, III | Published October 26, 2007, 4:00 PM
It was indeed an astounding quarter for Microsoft, with operating income having grown last quarter at an annual rate of 32%. A big part of that growth is attributable to Windows Vista. But does the fact that customers are adopting it truly signal that customers are embracing it? Yesterday, the company's chief financial executives offered some very revealing data.
What recession? Since Chris Liddell's arrival as Microsoft's Chief Financial Officer, the company's timing and execution have been impeccable. He has five business divisions whose books he manages, but the weight of capital expenditures in the revenue of at least two divisions have been more than offset by gains in the other three that help Microsoft to cruise right along.
"The first quarter represented an outstanding start to the fiscal year," Liddell stated during yesterday's Microsoft quarterly conference call to analysts, "with every part of the company performing at or above expectations. In particular, we're very happy that consumer demand across our total product range propelled revenue, operating income, and earnings per share growth by 27%, 32%, and 29%, respectively."
Those are annual growth rates, which are phenomenal for a 32-year-old company.
What sets the stage for this perfect chain of events is the overall global PC market, whose predicted slowdown has failed to show up on time. Global growth in hardware is as much as 12% annually, Liddell reported, which is 1% higher than predictions at mid-year and several points higher than many analysts had forecast at the beginning of the year.
"PC growth rates in emerging markets continued to outpace that of mature markets," reported Investor Relations General Manager Colleen Healy, "driven by robust growth in Brazil, Russia, India, and China, which grew a combined 20%." Just by itself, Liddell added later, Russia's PC market annual growth rate was an astounding 100%.
There is this undeniable fact: Demand is high for Windows Vista. Thus far, Liddell stated, 85 million units of Vista have shipped, versus 45 million units of Windows XP during its first year of sales. "Clearly we're very happy with the Client division overall," he told a UBS analyst, referring to its 25% annual revenue growth rate. "Since we've launched Vista, the revenue growth has been in excess of 20% for three quarters in a row."
But from whom is that demand coming? One aspect of Liddell's character thus far during his tenure as Microsoft's CFO has been his clarity. Unlike most any other senior executive, he uses the fewest euphemisms and hyperactive participles, opting instead to get straight to the point. And Liddell's point was this: Vista demand is higher not necessarily because it's just so much better than XP, but because the market is different now.
A full 75% of the "mix" for Vista sales during the previous quarter belonged to the Premium SKU, the most expensive setup. For Q1 2006, 59% of the mix for Microsoft OS sales belonged to the high end, including XP Media Center Edition.
Over 80% of the revenue to the Client division, which represents Windows, comes from OEMs - companies that build computers and resell them with Vista pre-installed. (As a whole, the company takes in 30% of its revenue from OEMs.) But the rate of revenue growth from OEM sales is increasing faster than the rate of shipment growth to those OEMs, because they're paying more for Windows, thanks to the higher demand for the Premium SKU. Consumer premium units grew at an astounding rate of 150%, Healy reported, compared to a business premium growth rate of just 11%.
Since OEMs are demanding Vista at a faster rate than before, they're going to call for the version that adds the most value to their systems. Right now, that's the Premium SKU.
Also, as Liddell pointed out, the market is different now because of client annuity agreements. Simple box sales constitute an infinitesimally small fraction of overall Windows sales; most of what Microsoft does not sell to OEMs are in effect "pre-sold" to subscribers. As a whole, the company makes 40% of its revenue from annuity agreements. With annuities growing as a percentage of overall sales, subscribing customers have automatic expectations that those annuities will pay off with the biggest upgrades in the shortest amount of time. So demand not only increases but becomes "skewed," if you will, toward the highest valued product in the mix.
"Client annuity agreements...are the best leading indicator we can think of, of people's intention to adopt," remarked Liddell. "It's still very early in the adoption cycle for businesses, but the volume licensing portion of our business was up 27% in the Client area, so that's a very good leading indicator from our point of view."
Wouldn't intention to adopt Vista be higher, a Goldman Sachs analyst asked, if Vista SP1 were made available sooner rather than later? "Certainly some businesses will be waiting for SP1 to roll [Vista] out," Liddell responded, "but in terms of [their] willingness to sign up for the client element of the multi-year agreements, their intention to roll out is, I guess, signaled by that. So it's still early days as to what the actual adoption numbers are, and we think they'll increase during the year, and obviously will be helped to some extent by SP1. But some of the leading indicators are what we feel good about."
Next: Is Vista SP1 driven more by demand or expectation?
Dont make me laugh MS and try to spin it (even in the slightest) to say that Vista had any positive effect. Vista sucks, anyone with a brain knows it. Every singe company that we consult for requested that Vista be uninstalled and reverted back to XP. Thats thousands and thousands of pissed off customers. Dont worry MS, your Xbox division is now your best division. Its saving your asses big time.
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|Really dude...you need to keep your mouth shut on issues you know little about.
I'm going to attempt to believe you are not intentionally lying for now, but it sounds like you haven't spoken to anyone outside of 'your box' of friends regarding Vista. I've used Vista since the Beta--admittedly only using it daily starting around March of this year, but Vista is not nearly the apocalyptic nightmare that you make it out to be. It initially was plagued with third-party incompatibilities and even a couple of internal problems, but it has worked quite well on my box.
Despite a few issues here and there, it has had quite a positive effect on me, so please quit lying and speaking for people in which you do not know.
Every singe company that we consult for requested that Vista be uninstalled and reverted back to XP.
Where did you read that? The IHateMicrosoft.com Times? You can hate Vista all you want but please try not to present opinion as fact.
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|I think that the sales reported pertain to stores and resellers buying the software for their shelves or inclusions on their product/computers.
If there are 10,000 stores that order and buy (at cost) 100 copies of Vista, then MS can report sales of 1 million. But this doesn't mean that 1 million shoppers stormed the stores and trampled each other to buy it.
This fallacy also applies to books and record/cd sales.
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|The only reason Vista is making money is that it has high copy protection that stops the pirates from stealing their drm. This way they have to buy vista and their money goes up.
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|Hey, extremely weii (2 capital i's in the end), my beloved brotha' -- I've already stated that fact in somewhat more eloquent words that sooth the ear:
"Microsoft's "Stellar Q1 Gains" is probably mainly due to increased anti-piracy pressure by Microsoft, worldwide. I know of dozens of would-be-and-have-been Windows pirates in foreign countries that have BOUGHT a Microsoft OS for the first time in their life with a new PC... Why? Cuz they HAD TO. In most European and Asian countries you don't get an OS pre-installed on most purchases..."
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|Vista runs nice on my old machine (Pentium 4 2.8Ghz; 1GB RAM; ATI 9600 256Mb). It's a great OS.
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|'nice' is rather subjective. I think it runs like crap on my system (C2D @ 3.6Ghz, 2GB RAM, 7950GT 512MB). It's a s*** OS.
'crap' is rather subjective too. But I can say quantitatively that it's worse than XP for performance. Much, much worse. And (IMO) offers nothing for the trade-off. If anything, the UI is even more annoying.
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|And XP performs worse than 2000.
We all know this. Can we stop whining about it?
Please?
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|Fail. Turn off the themes service and a few other things and XP can easily be trimmed down to 2000 level performance. The same can't be said for Vista, not even close. Of course new OSs are usually more demanding than older ones, but they usually add something worthwhile which outweighs this issue. Vista adds next to nothing.
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|You can do the same with Vista. Don't think so? Google vlite.
You do realize it took folks a while with XP to figure these things out. (Running TinyXP at home right now, they've only been around for a year or two at most)
"Vista adds next to nothing."
I bet you are one of those folks who think the only new feature of Vista is eye-candy, right?
Still it has very little to do with the OP, so why bring it up? Couldn't find anything else to argue about? ;) (Not that we don't like arguing in this forum...)
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|I just bought 2 Acer quad cores with XP Pro and am selling a CyberPower with Vista Ultimate. Names have never cut any ice with me. I figure 7 will be released in 2 years.
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|What?
What was the point of telling us that?
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|I just saved a bunch of money on my insurance by switching to Geico
/obscure?
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|Eventually Vista may not even reach 50% marketshare, before it is replaced as the newest version by Windows 7. XP reached 80%+ because of 5 years.
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|The profit increases come from shoving a greater number of OEM units down makers throats. Does anyone NOT understand that the greatest cost to MS comes from the BOX and printed material and not the product itself? Companies like Toshiba contract for its restore disk from another party and stores it themselves. So how much did it cost MS to create, warehouse and ship 1 master disk as compared to several million boxed units? When they get the leased software model up and running their profits will soar! Sure piles of guys will be out of work but big MS shareholder's will need servants.
As for how great it is, I've upgraded 20+ books to working status with XP. Having to get new code written because Vista can't run your companies software... yeah there's a step forward. Good thing employees go without salary when their productivity drops like a rock buggering around with a gimpy book.
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|Microsoft's "Stellar Q1 Gains" is probably mainly due to increased anti-piracy pressure by Microsoft, worldwide. I know of dozens of would-be-and-have-been Windows pirates in foreign countries that have BOUGHT a Microsoft OS for the first time in their life with a new PC... Why? Cuz they HAD TO. In most European and Asian countries you don't get an OS pre-installed on most purchases...
Anyway, Vista is impossible to steal for 99% of the folks out there...
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|99%? you don't know very many people lol
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|He doesn't know much of anything, just pretends to.
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|Vista is a great O/S, quit trying to run it on POS computers. You need 2 GB of RAM to run Vista. I have had no problems and by far faster than my 2.8 Ghz running XP even with a brand new restore.
Buy a computer pre-designed for Vista, don't upgrade from XP, you will be sorry.
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|Hol, you must only do occasional news-reading & email checking...rotflmao.
Most of my professional office, investing & database apps run way faster on XP & older systems than on the newest screaming-edge systems with 4gb ram, etc.
Even the few apps like Photoshop, that are constantly being re-tooled to take advantage of the latest in OS & hardware, have to deal with Vista's bloat, rushed coding & poor memory management / leaking.
I'm VERY pessimistic that other / mainstream apps ANYTIME SOON will be able to fully take advantage of the latest in OS & Hardware, what with having to deal w/ Vista, 64bit, the next file system & OS[Vista is just a temporary stepping stone], etc. while having to maintain backward compatibility... I really feel sorry for someone like Adobe-- that has to write code for Mac(both older & newer OS), Linux(and so many variants), Windows in all its glorious versions... all of them in both 32 & 64bit... having to be able to run in legacy hardware while keeping in mind ever-increasing cores/processors/ram per system.
Even if we were to agree, for the sake of argument, that Vista was the greatest thing since sliced bread-- so good in fact, that it wouldn't need to be updated for another decade(disregard for now all that was left out of it to either be added subsequently or released standalone)-- it would need normal re-tooling / fixing:
there hasn't been a single Windows version ready for production / mission-critical upon initial release... that does not apply until a subsequent Rel., Ed., or SP... for practical purposes AT LEAST one year afterwards.
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|what's funny out an MS troll like you, is that you probably have no experience in pc repair. I've run vista on 2gbs of ram and it was slow. the RC1 version worked better then the retail copy. Most of the pcs that are 'pre-designed for vista' can't really run vista. the first two editions of vista (home basic and premiere) offer next to no (or none at all) improvements or 'features' over MCE. On top of that probably 80% of the people who read/post here build their own pcs (cept you maybe) and are capable of upgrading their pcs to run vista if they so choose.
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|Even the name suggest its bad. Vista? Sounds exactly like my XP on a bad day. Its vistarific!
I'd imagine that the day i have to install Vista is the day one or more programs doesnt run on XP, i hope it never comes. Sad truth is that it will... *tear*
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|I hate Vista. We have a few corporate PCs (four to be exact) deployed with Windows Vista and all those PCs are very very sluggish.
I want to say it again: with 1GB (!) of RAM they are slow as hell. All necessary drivers are installed and almost no background applications are running except Windows own services and applications.
It's unbearable. We're thinking about downgrading to Windows XP.
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|I'm betting those are new systems-- force-fed Vista in other words... otherwise, it's just sheer madness to use a new Windows OS in a corporate environment.
The only reason i'd've gotten it is to try 64bit-- in fact, I wouldn't/won't upgrade from XP until a robust 64bit Windows is ready.
You were also kinda hoodwinked with only 1gb ram(memory is SOOO cheap nowadays: http://salescircular.com/ny/computer/memorp.shtml )for Vista, which is SO bloated-- just try running a simple app like CoolKill-- you'll see how much more stuff is running on Vista vs XP. To safely slim down Vista, I'd suggest:
1. Google TweakHound, BlackViper, vLite... btw they each have differences & complement each other.
2. Best solution, IF you have a copy of win2K lying around: it can installed with no serial, then quickly updated in one shot with: Autopatcher 2000 and/or Unofficial Windows 2000 SP5... or better, slipstream the install disc: http://www.vorck.com/2ksp5.html
A. You've already paid for an OS- unsuitable to your needs... why go out and spend money twice.
B. Very, very likely there's nothing you can't do on 2k vs XP... and it WILL run MUCH faster than any/all subsequent Win versions.
PS One other $0 alternative IIFFF you have a complete Vista install disc... Enterprise or Ultimate: try uninstalling & substituting Vista 64bit in one test machine(EULA mandates either or can be installed at any one time, not both simultaneously; same license key btw)-- it may work better than its 32 bit cousin. It will require more memory though-- i wouldn't run vista 64 with only 2gb-- the max the mobo will take... but you need / can always use extra memory; i would NEVER skimp on it... esp. since it's so cheap(hopefully that holds true where you are).
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|Huh? I just bought two laptops and a PC from Dell. All but one laptop had XP on it. Dell is the only vendor that is still selling XP. They were to cease offering Vista Jan. 31 but MS gave them an extension till June '08.
The one laptop I bought with Vista was a Vostro 1400 and there was no option for XP.
Vista is a exercise in annoyance. Example: it takes two mouse clicks to set the clock in XP as opposed to six in Vista. It's like that with everything.
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|Wow, it's beginning to sound like Linux.
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|You do realize that MS counts all the OEMs that companies purchased as an already sold OS in their eyes. A unit sold does not an installation make. So thats part of the reason they still consider Vista a success. there are thousands of OEM left uninstalled on many peoples machines, or sitting on a factory shelf that MS counts as a sold unit.
How many thousands of users are taking advantage of the Vista downgrade rights? LOTS... Especially businesses. Cause there are just not enough Business programs that will work on Vista yet. Except for MS products of course, but even some of those (Great Plains) can not be installed on Vista without significant upgrades that often cost a company thousands to get tailored to their needs. And if they do that the company needs to commit to a Company wide computer upgrade to Vista. Ouch again...
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|Great Plains is horrid. any business that uses that crap deserves bankruptcy.
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|Secretly I agree with you 100% ... but Thats a good part of business infrastructure where I work so I have to deal with it. lol
I also deal with mas200, and master builder, and crystal reports... any guess why I am not a fan of Vista now? lol
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|lol @ crystal reports. im an as400 mapics man myself.
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|MAS90 isn't any better... nor was Cisco's VPN client for quite some time. :(
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|vista is a really great product, so yes I can definately see it boosting profits. its a very refined os. Im always perplexed by people that prefer XP. I suppose for gaming you could still cling to xp for now though.
Vista X64 is the greates os ever.
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|What color are the skies on your planet? They're blue here on Earth.
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|Is there a noticeable difference between x86 and x64? I have been avoiding the x64 version because the software support just doesn't seem to be there yet.
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|i notice a speed increase when using something like a 64 bit version of 7-Zip. 64 bit has come a long way from the starting days of XP Pro x64. There is drivers for everything now, and most well coded software will run on it.
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|:) teehee so funny, you are like the internets version of robin williams.
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|You think Vista is better than OS X? Obviously you haven't tried it.
Ubuntu is starting to become an option too. Microsoft better shape up!
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|Here is pretty good run down of x64:
http://www.winsupersite....se/winvista_1yr_x64.asp
Speaking for myself, I installed x64 off the bat and haven't had any issues but I don't have any really old hardware/software kicking around.
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|Microsoft is going to buy Apple and Linux, face it. You will be using Vista on your quad cores and you will like it. I know that's hard to hear because I make so much sense.
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|there is still software that doesn't work with x64. Maxtor one touch software for instance.
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|There will be no Office 13, code name Office 14.
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|Hell, no...
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|That was such a well thought out, insightful and helpful opinion on the matter that I just had to comment on how much it helps further the discussion.
You sir, should be modded up for your generous contribution to this topic.
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|Says you....
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|Says anyone... you came on here just to troll offering no insight whatsoever
If you don't like the OS don't use it, why waste breath on something you don't like?
I don't get the internet....
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|Talk to the hand...
BTW, "Don't get the internet"? You sound like the guy who wanted to try the internet out at home so he asked the tech to put it on a floppy for him. [smiles]
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|I was being facetious hence the dots afterward...
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|"talk to the hand"? you sound like the 4 year old who asked the tech to put his brain on a floppy for him
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