Microsoft's Ballmer touts Windows 7's big holiday

Windows 7 desktop sales "through the roof" says NPD Group

Microsoft CEO Steve Ballmer bragged up Windows 7 success last night in his keynote speech at CES.

And he wasn't lying, said Stephen Baker, an analyst with the NPD Group, which provided Microsoft with some of the numbers that Ballmer used to trumpet Windows 7 's first two months on the market.

"Oh, yeah, the numbers were right," said Baker from Las Vegas. "From all angles, from unit sales, from dollars, it was a great holiday season for Windows 7."

Ballmer cited NPD data several times during his CES keynote . "U.S. retail data shows that Windows PC sales jumped almost 50% the week it launched," said Ballmer just minutes into his presentation. "On Black Friday, [NPD] reported that retailers sold 33% more Windows PCs than the year before. And for the 2009 holiday season a 50% increase in Windows PC sales from last year. Last year was a tough year, but these are still phenomenal numbers."

Last night, Ballmer also announced that Windows 7 was "by far the fastest selling operating system in history."

"He must have gotten that from someone else," Baker said, noting that NPD had no data to confirm or deny Ballmer's claim.

But Windows 7 did have a great opening two months, Baker agreed. "PC sales were pretty dramatic," he said, "and it's definitely a Windows 7 thing."

What took Baker by surprise was the big bump in sales of desktop PCs, a category once thought at death's door. "To some extent, desktop sales have been through the roof in the holiday season," he said. "For a while there, desktop sales were slow, we were seeing negative growth, and they were doing bad, really bad. But during the holidays we've seen nothing but positive numbers. It's not been huge -- desktops aren't going to outsell notebooks any time soon -- but even so, it was a big surprise."

Baker was hard pressed to explain the uptick in sales of Windows 7 desktops, although he had a theory. "While a lot of people may be upgrading their Vista laptops [with a retail upgrade copy of Windows 7], generally consumers' desktops are a lot older than their notebooks," Baker said. "Those older desktops are probably running Windows XP."

In other words, consumers may be deciding to buy a new PC with Windows 7 already installed rather than go through the hassle of trying to upgrade the older hardware to the new operating system. Or they may believe it's simply time to retire the XP workhorse.

"The desktop is usually the central controlling computer in the house," Baker argued. "And Windows 7 gives consumers a better experience for that."

Last month, Baker said a similar upgrade scenario had played out on the Mac when Apple's desktop sales climbed 71% in October and November over the same months of 2008.

"Windows 7 is a hit," said Baker, comparing its opening months to Vista's much smaller impact on PC sales three years ago. "As a product, it's great. But Microsoft is also doing a great job on the marketing end as well," Baker added. For an example, he pointed to a special that Best Buy ran yet again in its circular last Sunday that offered three Hewlett-Packard computers -- a netbook, a notebook and a desktop -- for $1,199. All three PCs are equipped with Windows 7.

"They keep running that special," Baker said.

In Baker's eyes, Microsoft biggest mistake with Windows 7 was to yank the popular Family Pack, a multi-license bundle that customers could use to upgrade up to three PCs from Windows XP or Vista, to Windows 7.

Microsoft pulled the Family Pack in early December, about a month after it first offered the $119.99 package.

"That was a mistake," said Baker. "What [Microsoft] doesn't seem to get is that the nature of what people own is a lot different now. There are multiple PCs in the house, and all of them could use the upgrade."

What makes Microsoft's move all the harder to accept, said Baker, is that the company's most popular edition of Office is Home and Student, which lets users install the suite on as many as three PCs in the same household.

"Microsoft needs to be more aggressive on price to drive adoption of Windows 7," Baker said.

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