Survey: Vista Sales May Start Slowly

A study suggests companies plan to wait to upgrade operating systems.
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With much of Wall Street assuming that the launch of


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new versions of Windows and Office will give the company's ailing stock a major boost, a new survey suggests that initial sales will be relatively slow.

A survey by JupiterResearch of 207 businesses, including 73 of them with 10,000 or more employees, found that 62% will wait longer than 12 months after Vista is available to deploy it. Strikingly, one-third of those surveyed had never heard of Vista or had no deployment plans, says Jupiter analyst Joe Wilcox.

Although Microsoft is moving into markets beyond its desktop franchise, Windows is still its most important product. In the fourth quarter, for example, the Client business unit, which includes Windows, reported revenue of $3.38 billion, or roughly 28% of total revenue. Its contribution to profitability was even more striking. The business unit accounted for $2.05 billion of the company's total operating income in the quarter of $3.88 billion.

The Information Worker unit, which sells Office, had revenue of $3.13 billion and operating income of $2.15 billion. Losses in other business units explain why the combined profit of the two segments is larger than the company's total profit.

Although the survey didn't look at deployment of Office, Wilcox said in an interview that the pattern of adoption will likely be similar to Vista.

The largest businesses, he says, will wait the longest to deploy Vista, with only 10% planning to start the process within six months of the software's release.

Vista, the successor to Windows XP, is at least two years overdue, and is now scheduled for release to businesses in November and to consumers in early 2007. A senior Microsoft executive last week said the products are on track for delivery, but added a note of caution that has become equivalent to boilerplate in discussions of new Microsoft products: "Vista will ship when it is ready. Quality is job one," said Kevin Johnson, co-president of the company's Platforms & Services Division.

The results of the Jupiter survey shouldn't really be a surprise. It took years for Windows XP, the current version of Windows, to become pervasive, and many industry analysts have predicted that the same pattern will hold true for Vista. Although Vista is expected to be a definite improvement over XP, it lacks some of the most important features that were initially supposed to be included. Without them it will be harder for Microsoft to make a compelling case for immediate adoption.

Moreover, says Wilcox, many companies have recently upgraded their PCs, and will be in no rush to buy new machines equipped with Vista, or undergo the laborious process of upgrading existing PC to a new operating system.

Shares of Microsoft closed Wednesday up 31 cents, or 1.3%, to $24.30.