RSSMicrosoft wins round one in its battle against Vista
By Scott M. Fulton, III | Published October 23, 2009, 12:45 PM
Anyone who would continue to frame the consumer PC market in 1980s terms, as a continuance of the old war between Microsoft and Apple, would be sorely disappointed by this morning's earnings news from Microsoft. The measured candor that continues to emerge from CFO Chris Liddell suggests that Macintosh and iPhone are not even on the company's radar at the moment, and that his real battle is against a tougher and more menacing foe: Vista.
As of yesterday, it was officially okay for Microsoft to pronounce Vista part of its past, to "un-support" it from a marketing standpoint (though certainly not from a service standpoint). Steering Microsoft clear of the perfect storm -- the effects of the global recession, coupled with the peak in negative attitude toward Vista -- means putting Vista behind it, placing it in the adversarial role normally characterized by someone who looks a lot more like Justin Long than John Hodgman.
If Microsoft had continued on its unprecedented downward slope, as it was forced to report on last July, analysts might have concluded the company was in a recession of its own -- a kind of corollary of the "two consecutive quarters of decline" rule normally applied to the country's economic state. But the slope was not so down this time, and literally all the credit was bestowed upon the company's newest, bravest warrior, Windows 7.
"To put the quarter results into perspective, Q1 represented the highest number of Windows licenses sold in one quarter, ever," pronounced Investor Relations GM Bill Koefoed, "and September was the highest single month of Windows unit sales ever. In summary, it was a very solid quarter for the Windows division; and with Windows 7, we have a great product for the recovering PC market."
During the low point of the economic crisis, what kept the PC market from collapsing altogether was the ability to shift its product mix towards netbooks -- the lowest-priced segment, but certainly the lowest-margin end of the business as well. As Microsoft CFO Chris Liddell reported, netbooks went from 0 to 12% of the overall consumer PC market in just one year's time. During that same year, Windows was able to find itself installed on 90% of those systems.
"Find itself" is actually a very accurate phrase, because this wasn't really what Microsoft intended, and it actually became something of a real problem. At a time when the company needed to tout Service Pack 2 as the life saver for Vista, the netbook surge presented consumers with the single biggest confirmation of Vista's inadequacy to date: the presence of Windows XP, not Vista, on nearly all of those netbooks.
"People are clearly willing to pay for having Windows on their netbooks, so that's the first and most important fundamental," Liddell told a Deutsche Bank analyst this morning. "Then in terms of Windows 7 reaction, clearly [we've] yet to see, but early indications in terms of the OEM builds that we're having, and the mix that they're putting in terms of Windows 7, is encouraging...in terms of their expectations of the number of people who are going to want to see a Windows 7 on their netbook as opposed to an XP. In terms of the ASP [average selling price], clearly it's almost twice on Windows 7 what it would be on XP, or a significant premium...So it's going to be beneficial, but I think it's more important symbolically from our point of view that people see value in Windows 7 and are willing to pay for it. Netbooks, even though they've grown fast, are still a relatively small component of the overall demand, so it's not going to have a massive financial impact, but it'll certainly help in terms of ASP comparisons year-over-year, if we get the sort of good attach of Windows 7 that we're starting to see in the early days."
As it did during Vista's premiere, Microsoft has opted to defer about $1.5 billion of revenue from pre-orders of Windows 7 from OEMs and retail customers, until the following quarter. Still, the activity surrounding Win7 in this past quarter indicated that the period of time in which customers were deferring their operating system investments had clearly ceased. Operating income from its client division, now called the "Windows and Windows Live" division (reflecting the realignment of online software around the core product, and away from online services like Bing), dropped only marginally on an annual basis to $2.81 billion, on revenue just 3.3% lower at $3.98 billion. With Server & Tools and Entertainment & Devices income slightly higher on the year on revenue that was basically flat, the company was able to sustain a huge hit from the declining value of its stock awards -- essentially a $2.2 billion write-down.
So total income was down about 25.3% annually to $4.48 billion -- not good, but not unexpected in the wake of last quarter. And besides a little bit of credit given to the success of Halo 3 on the Xbox 360 game platform, Windows 7 enthusiasm was credited for keeping income from business operations stable.
"What I think we're seeing is the robustness of the concept of a PC," Liddell told an RBC Capital analyst this morning. "Even through an economic reset, it's something that people want to spend money on, and I think that gives us confidence in the sort of long-term trend, the long-term ability to have good, potentially double-digit growth in PC demand. That's clearly helped by the fact that we've got new form factors, Windows 7 helps clearly. You're just seeing a general positive trend on a long-term basis [for] a reset."
The next battlefield for Microsoft will be getting Vista off of business desktops and notebooks. Toward that end, the cards could finally be stacked in Windows 7's favor, for reasons Liddell alluded to today. Existing business PCs can be perceived as slow, for either of two reasons: If they're five years old or more, they're probably single-core. And if they're newer than that, they're probably stuck with Vista. Either way, they're slow, and that perception may play into business' decision to make a PC investment during calendar year 2010.
At least maybe. "The big variable in my mind is business PCs," stated CFO Liddell candidly. "That's been a significant negative, that's decreased double-digits over most of the last few quarters, and it's dragged down the numbers. That can't continue forever. Eventually those PCs wear out and have to be replaced, so the big variable in terms of rebound is going to be the strength and speed of the business PC refresh cycle. We hope and expect that to be next year...We're probably still relatively cautious, but when you start to see a rebound in that, plus what you're seeing in the consumer side, we feel pretty good about what we see demand's going to look like in the next calendar year."
Liddell did let something slip a bit when he said that revenue for the Business Division should recover in the near term when business spending in general recovers, "combined with the impact of Office 2010." That's a product whose release window even now is the entire next year, but Liddell's framework seems to put O10 someplace closer to late second-quarter, early third-quarter.
No support for Vista, huh?
Sounds like a miserly way out of an obligation to its product and customers
Sounds like GM, its bankruptcy that severs any obligations to the customers with their faulty crapmobiles. Needless to say, GM has lost many customers "for good".
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|Just to clarify, Retail/Home Vista "retail" support will end in 2012, while business will get extended support/security updates into 2017. I think you can still apply a majority of future security updates/fixes for all versions of Vista until 2017. If not via windowsupdates then via autopatcher.
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|I really don't understand this circular firing squad mentality that is currently seeking to demonize Vista. Vista may have had serious issues but that ship has sailed. The only Vista issue worth discussion is whether Vista users should be given a discount on the upgrade to mollify hurt feelings. A case could be made there. Telling an angry customer base you feel their pain is cheaper than a discount but it will not sell.
The larger issue is the failure to provide a reasonable upgrade path for the ~ 70% of Windows users stuck at XP. The reasonable approach is not to (wink wink, nudge nudge) borrow a copy of XP and kick-start the upgrade. Why not put the appropriate files on the installation DVD and give XP users a break rather than punishing them. How many people know someone who would be wiling to "loan" their DVD for such a purpose? Microsoft has done everything they can to scare the community on the issue of pirated software with integrity checking tools. Also, not all versions of Vista can be upgraded to all versions of 7. Someone correct me if I wrong here.
Another issue I was recently made aware of is the XPM availability issue in Windows 7. I am told that the XP Mode virtual machine will be available only in 7 Professional and 7 Ultimate. Again, someone correct me if I am in error here. That is just wrong and smacks of punishment. Doesn't good will matter anymore?? This will not matter to corporate customers since 7 Professional will be their overwhelming choice. Individual users are another matter. What is the point?
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|@ rauckr
In regards to which version of Windows Vista that is officially supported during the Windows 7 upgrade, knowing which version of Windows 7 you are going to install prior to upgrading from Windows XP to Windows Vista is necessary.
Windows Vista does not require a product key during the installation process. The screen asking for it is still presented, but it can be bypassed. You are then prompted to select which version of Windows Vista you are going to be installing, being presented with a list of all available SKUs. Each Windows Vista DVD is essentially an Ultimate disc, but the product key ultimately determines which features are installed or left out.
In other words, if you are going to be installing Windows 7 Professional, the only supported in-place upgrades are from Windows Vista Business. Therefore, during the Windows Vista upgrade, select the option to install Windows Vista Business.
Only Windows 7 Ultimate supports in-place upgrades from all versions of Windows Vista... except for Windows Vista Starter.
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|@ yountmj: Thanks for that information. That makes me feel a bit better.
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|@ yountmj: Call me paranoid if you like (I wouldn't be if people weren't out to get me) but I still think Microsoft has installed fingerprints on each copy of Windows (independent of the registration code) that allows them to track what you do with it. In any event, putting the required code on the install disks to allow an XP to 7 upgrade is still the right thing to do. I'm ok with Microsoft warning about the risks if your registry is a mess although I think Microsoft has neglected built-in registry maintenance.
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|@ rauckr:
That's something I agree with completely... a built-in Microsoft registry maintenance utility.
Something that I've noticed after years of removing malware from customer's PCs: a large portion was installed through various registry "cleaners" and "optimizers".
It's something that I'm sure will be implemented in the future, just as they eventually did with their firewall, malware security utilities, etc.
Windows indexes file search locations and defragments volumes behind the scenes... a background registry scanner is very logical. Perhaps a scheduled weekly or monthly scan of the registry... or a dynamically-initiated scan based both on how much the PC is used on a daily basis, and how frequently software is installed / uninstalled.
The way I see it, who knows the Windows registry better than the Microsoft engineers themselves?
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|@ yountmj: I had heard that registry maintenance was better on Windows 7 (and perhaps Vista) than on previous versions but I am not clear on details.
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|I forgot to include Windows 7 Enterprise version in the list supporting XPM. Too many versions to suit me.
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|Enterprise, Ultimate, and Starter will not be available @ retail. Home Basic will only be available in developing nations. The only retail versions you can buy in stores in the US would be Home Premium and Professional.
So really, the only option you have @ retail is Professional if you want XPM. The "version confusion" people complain about is pretty much a strawman at this point. The only versions you'll see o OEM systems are HP and Pro. Starter is a non-starter...if you get my drift. :)
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|Correction:
Windows 7 Ultimate is also available through retail outlets... not just Home Premium and Professional.
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|@ yountmj: I noticed that on Amazon.com.
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|This is news. I had heard (from what I thought were reliable sources) that the Ultimate SKU was "Anytime Upgrade" only...
Are these "OEM" copies, or "retail" copies?
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|Both, actually... but everything that I've read suggests "limited availability", a niche product targeting a very small customer base this time around. Essentially, a "retail" version of Windows 7 Enterprise without volume licensing.
"Will Windows 7 Ultimate be sold at retail?
Well, Microsoft says no. But check out the last sentence of this statement: "When we conducted research to determine which features customers value in each SKU, we found that some customers wanted a version of Windows on their PCs that offers every feature and experience possible," Microsoft said.
"Therefore, OEMs will be able to preinstall Windows 7 Ultimate on new machines, and we may license Ultimate in retail channels during certain promotional periods."
So what does this mean? You may not see Windows 7 Ultimate in retail yet. Otherwise, it will only be available through the update process, described in the first section of this article."
http://www.extremetech.c...2/0,2845,2340437,00.asp
"Windows 7 Ultimate is kind of a wild-card. It will be available at retail and with new PCs, but Microsoft says that it will not be heavily marketed and will instead be "offer-based" via occasional promotions and offers from both PC makers and retailers."
http://www.winsupersite.com/win7/win7_skus.asp
I've also seen pics here and there before and on release day from different retail outlets that showed all 3 boxes being unpacked... for what that's worth.
http://www.engadget.com/...il-boxes-hitting-stores/
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|Wow. Excellent post, man. Good info.
So it's a promotional thing (Windows 7 launch). I wouldn't be surprised to see it stick around though... Some people are sure to be had by that version...when all they really need is Pro or HP.
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|No problem bud.
By the way, I'm kinda split on the exclusion of the Ultimate Extras. Some were decent, some were easily forgettable.
I would personally like to see continued development of them, but market them as a renewed Microsoft Plus! 7 product. Those were essentially the same thing for previous versions of Windows.
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|Bah. Don't even get me started...
The sooner I forget "Extras", the better. What a joke. Microsoft might as well have spit in the faces of everyone who purchased Vista Ultimate. It would have had the same effect. I hope whoever was in charge of that got drunk one night and slid into a gas tanker @ 90 MPH, lighting up the highway in a spectacular explosion. I hope it threw him 150ft onto a roof somewhere where he miraculously survived for days until he slow roasted to death in the hot sun on the tar.
Like I said...don't get me started. :)
(I am holding back...you don't want to know how I really feel.)
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|Heh... good stuff. =)
"Microsoft might as well have spit in the faces of everyone who purchased Vista Ultimate."
Don't have to tell me. I'm the "proud" owner of the Bill Gates Signature Edition... 21242 / 25000.
Before I catch too much flak for it, Best Buy screwed up and had it on the shelf for the same price as the regular Ultimate. I said "eh, what the hell" and grabbed it.
I find it ironic that the first version of Windows that I've ever paid for (not terribly proud of that fact... just a perk of working in the IT industry) ended up being the one I was most disappointed with.
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|This place is rigged with MS kiddies, to become worms and zombies. Comments gotten deleted (only if its negative towards MS) how much did they paid you?
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|troll!!
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|troll with horrible grammar!!
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|i no! lol!!!1
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|XP will complete 8 full years on Sunday and it's on 60%+ of the PCs right now! Simply amazing product MS got right back then.
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|Windows 7 will def. beat XP too, as far OS X and Linux go, they are no competition to Windows 7. It blows them out of the water
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|BS! clone!
This place is so rigged, hacked by a MS fanboy just to sway the sheeps into it repeated junk and infection monopoly, sham on you!
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|Sham on you clone! OSX is STILL the most advanced OS compare to Vista 7, full multi touch right out of the box, no need to wait or look else where!
Still no virus or trojan, so safe that you dont even think of a firewall
Mac is well built that you can use it more than 4 years, and still able to sell it in ebay... compares to those cheap plastic junk!
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|You're obviously just a troll; 7 has full multi touch capability out-of-the-box. And if you really think MacOS has no viruses or trojans, you're a tool.
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|Slim_Is_In: oh man, which comedy show do you work for? oh those apple ads...
Remember Charlie Miller? He was the one to knock out OS X within seconds in the hacking contest which was held last year. After the release of alpha service pack SL which costs $30, this is what he said: Charlie Miller: Snow Leopard is less secure than Vista and 7:
http://www.neowin.net/ne...ess-secure-than-windows
And no trojans for OS X? HAHHAAAAAAAAAAA oh man you are a clown.
Read that properly and get that thing into your dumb brain!!
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|@shellcodes_coder : Thats if you LET a hacker in, then anything is most likely will get hacked... duh!!!
But if you dont, like normal net surfing... then its most/never will happen @Miller said. "I wouldn't recommend antivirus on the Mac."
Bottom line, too safe to go with an antivirus! :p
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|"Thats if you LET a hacker in... (blah blah)"
Perhaps you'd care to elaborate on how that is any different from how security is implemented in Windows Vista, and even more so with Windows 7 through UAC and Internet Explorer Protected Mode.
Might as well throw in security features such as Network Access Protection, DirectAccess, BitLocker drive encryption (and BitLocker To Go for USB drives), AppLocker, biometric integration, multiple active firewall policies, etc.
Oh... and try to at least offer an answer that's halfway believable.
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|I think Slim_Is_In is just Fatty in his dreams.
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|@ Slim_Is_In "Still no virus or trojan, so safe that you dont even think of a firewall"
Like saying... it's ok to have unprotected sex with a hooker.
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|Can it play Counterstrike Source natively or play blu ray movies yet?
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|That's great! Fantastic! Whoop-dee-doo!
They *need* to form a strategy against Windows XP... and not allowing an upgrade path is *not* a good start.
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|I think I just threw up in my mouth.
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|I had the same thought. Win7's biggest competition is XP.
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|but yet it's so easy to upgrade XP. MS themselves even outlined the process. Yes it will be a clean install but that's the preferred method anyhow
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|Just buy a OEM copy on newegg for 100 bucks and be done with it. Turns out the upgrade costs 20 bucks more then a full OEM copy. So you have no point at all.
And if for some insane reason you wish to upgrade and not do a clean install. Then you have more problems then I thought.
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|XP is the past. It looks dated and is dated. Get with the program.
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|@bigsexy022870
How does that have anything to do with the point I was making?
Did you know there's a reason why OEM is cheaper? Did you know there's a trade-off? It's called being legally tied to one PC and not transferable.
If you don't care about "legal", then why not just suggest the "warez" avenues...
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|"And if for some insane reason you wish to upgrade and not do a clean install. Then you have more problems then I thought."
The only ones with the problem are those with their heads still stuck in the late-'90s and early 2000s, refusing to accept the fact that there is little to no downside to upgrading anymore, unlike the upgrade path from the Win 9x series to the NT-based OSes. It's quite common knowledge that those were troublesome for many.
That is no longer the case with the image-based installer that Vista introduced, and that has been verified by several performance benchmarks (one in particular linked below). Windows 7 is no different.
http://www.extremetech.c...2/0,1697,2089952,00.asp
Get with the times...
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|Get with the times...
Quite true!
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|yountmj:
Must be something else going on then.
Did an upgrade from Beta to RC on my desktop...the result was extremely long boot-times and a sluggish response to virtually everything. Wiped it and did a clean install of the RC and everything was peachy again.
IMO: Clean is still better than upgrade. Oh, and there is no such thing as "too much time" on one's hands. :)
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|@ PC_Tool: Microsoft is swimming in talented software engineers. Don't tell me they can't analyze the registry and spot/repair problems. There is a great deal of third party software designed to do just that. Why don't they buy one of these vendors and build in a solution? The argument that some application might be damaged by an aggressive registry cleaning is bogus. Bringing the entire machine to it's knees is not the superior alternative and neither is a clean install if the user has many many applications installed. Finding all those install disks, user names, paaswords, install keys and anything else the software vendor can throw in your path is a nightmare.
MathCAD is a perfect example of the diabolical schemes we face. I recently had a corrupted file problem force a MathCAD reinstall. I had every piece of the documentation and the install disks (the actual disk plus the one for the previous version since I was using an upgrade version). When the tortured process was complete and I typed in the registration key, I was thanked for my interest in MathCAD and told I had exceeded the allowable number of installs. I had to call PTC and explain about my file corruption problem. They required the serial number of my hard drive and finally, after much dithering, a new key was provided allowing me to complete the activation process. Try multiplying various permutations of this goat rope by a large number of applications and the pain is obvious. The clean install is practical for a machine used to send e-mail and access the internet but not for serious users.
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|@ PC_Tool
"Oh, and there is no such thing as "too much time" on one's hands. :)"
As I quickly found out once I caved in and started playing WoW. =)
I'm not sure what was going on there either, in regards to your beta-to-RC upgrade. I had not performed that upgrade, as I left the beta installation alone and installed the RC on a different volume... as a means of judging the differences in performance and features. The only upgrade I ever performed with any version of Windows 7 was from Windows Vista Ultimate (32- and 64-bit).
If I remember correctly, you and others had pointed out that the RC in general was not as "zippy" as the beta, and the performance difference from RC to RTM was similarly lower... which I personally never noticed. I suppose it just proves that there are always exceptions to every rule.
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|My feelings exactly
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|@rauckr:
Heh... Never said I *liked* the fact that upgrades...as a rule...suck. I hate it. The registry issues can be fixed. The "DLL-Hell" can be fixed. Would the 3rd party devs ever accept a system that forced the issue? Not without a hell of a lot of whining. They're too used to being able to "game" the system. Following the rules (or, Allah forbid, Best Practices) is far beyond their ken. (...or their barbie)
@yountmj:
Google: WoWGasm.
"I suppose it just proves that there are always exceptions to every rule."
True dat.
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|@ PC_Tool: What are you saying? The inmates are in charge of the asylum?
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|When the "inmates" control the ecosystem? Heck yeah.
Can you imagine MSFT locking out any and all developers that do not adhere to Best Practices? Can you imagine any OS doing such a thing?
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|I personally would love to see MSFT lock out devs that don't follow Best Practices... would make coding for any of the MS OSes sooo much easier... would probably put me out of a job, but would make the coding playground a much more organized space to say the least...
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|Unfortunately, I think it's too late to dam the river on this one. The PR backlash it would cause would be suicide.
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|Round one: 7 beats Leopard and it's alpha service pack SL
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|