Reality Check for Vista

A survey of retailers by NPD, a market research group, found when comparing the "launch week" sales of Windows Vista to launch week sales of Windows XP, unit shipments decreased 58.9%, and dollars decreased 32.1%.

One possible reason cited by NPD analyst Chris Swenson: Consumers have gotten the message that hardware requirements for Vista are rather steep, leading them to defer purchases until they are ready to buy a new, more robust PC.

However, Swenson noted that the average selling price of Windows increased 65.5% to $207.13 and more than 30% of the unit shipments in the retail channel were the more expensive "Ultimate" version of Vista. "So, although total dollars were down compared to XP, I think the preliminary data shows that Microsoft's gamble on a new high-end Vista [version] will help keep dollar volumes from declining as rapidly as unit volumes in the near term," he said in a research note.

Ballmer also said Microsoft did not plan any major strategy shifts in how it returns cash to shareholders through buybacks and dividends.

He said the company is willing to spend money to acquire online customers as it battles for share against Google and Yahoo!(YHOO)

He does not foresee R&D declining as a percentage of gross margin -- currently at about 17% -- any time soon.

>To order reprints of this article, click here: Reprints