Surprise! Microsoft Says No Overtime for Office XP

In an uncharacteristically punctual move, Microsoft (MSFT Quote) announced Monday that it completed its Office XP software on schedule. The tech giant, notorious for delaying important product launches, is expected to make the latest Office version available to corporate customers as early as next month and to retail customers by June.

The right-on-time completion of the popular word processing, spreadsheet and email suite is good news for Microsoft, because it will give the company a much-needed revenue boost in the September quarter. With corporate technology-spending growth slowing, and PC sales in a double-digit drop-off, Microsoft needs the lift.

"That it will be released on time gives us more confidence in their ability to make estimates for upcoming quarters," said Crowell Weedon analyst Jim Ragan, who rates Microsoft a buy. (His firm hasn't done any underwriting for Microsoft.)

Office, one of Microsoft's traditional money magnets, accounted for 35% of the company's $23 billion in fiscal 2000 revenue and is expected to pull in about the same this fiscal year, according to Ragan. With its collaborative tools and added Internet functionality, Office XP is in line with Microsoft's .NET strategy, a plan to eventually sell all of its software via the Internet as a service rather than a shrink-wrapped product.

The software includes a number of snazzy features, such as smart tags, which remember names or words previously typed in the computer. Microsoft's timely completion of the product also could counter Wall Street rumors that the company may delay the Japan launch of its new video console, the Xbox. Microsoft already has delayed the European launch until next year. And Credit Suisse First Boston analyst Heath Terry wrote in a research note last month that he expects the Japanese launch to roll over into 2002 as well.

The company maintains that the souped-up game console will launch before Christmas season this year, in both the U.S. and Japan. "Xbox is still on track and our plans for shipping have not changed," a company spokesperson said in a statement. "We will be talking extensively about our commitment to the Japanese market when Bill Gates delivers a keynote address at the Tokyo Games Show later this month."

If Microsoft does delay its launch in Japan, it will be because the company feels its inventory will be better used in the U.S. than in Japan, Terry says. (CSFB hasn't done any recent underwriting for Microsoft.) In a drooping economy, Xbox will scrap for market share with Sony's dominant PlayStation2 console and Nintendo's GameCube, which also will be released before Christmas 2001.

"Microsoft would keep its roll-out costs down if it does delay its Japan launch, and it may want to do so since the (game console) market will be so saturated next year," said Sean Wargo, gaming analyst for market research firm PC Data.