Vista woes could hurt Microsoft's revenue, analysts say

The negative perception of Windows Vista caused a financial analyst firm to lower its revenue target for Microsoft.

The negative perception of Windows Vista may be catching up to Microsoft in the bank. On Wednesday a financial analyst firm lowered its revenue estimate for Microsoft's 2008 and 2009 fiscal years, citing a negative perception about the OS that is affecting its adoption by businesses.

The research report by Sanford C. Bernstein analysts also hinted at the release date for the next version of Windows, code-named Windows 7. In the report, analysts said they expect Windows 7 to be released in the second quarter of 2010.

In the report, analysts Charles J. Di Bona, Maureen Murphy and Mariel A. Hardi lowered their revenue estimates for Microsoft by US$49 million for fiscal 2008 and by US$395 million for fiscal 2009. While the 2008 revision didn't affect the firm's earnings estimate of US$1.91 per share for that year, it lowered its 2009 estimate to US$2.17 from US$2.20, according to the report.

"Support for Vista has been battered across all enterprise sizes and corporate constituencies," the report stated. "As a consequence, the Vista cycle looks likely to be materially less robust than indicated in our prior survey."

The key factor has been "overwhelmingly bad publicity" for Vista, particularly about the option for enterprise licensees to downgrade to XP from Vista, and the potential for companies to skip Vista in favor of Windows 7.

The downgrade option has been especially troublesome for Microsoft, which in some cases has had to extend the time it will sell XP due to customer demand.

The negative publicity has left businesses with a perception that there is no good reason for them to upgrade, according to the Bernstein report. "Almost no feature of the new OS is now seen as a meaningful positive driver for adoption," the analysts said.

Independent analyst Brian Madden concurred. "From a company standpoint, there is not a single damn reason people should use Vista," he said. "Will you sell another widget because of Vista? No. And besides, Vista has so many hardware requirements that you increase your costs."

The Bernstein report also cites costs associated with Vista, which would require some companies to upgrade their desktop hardware because of the increased system requirements, a further impediment to adoption.

Moreover, some features of Vista that Microsoft promoted as key reasons to upgrade, such as security, have been undermined by negative publicity around tools like User Account Control, a new security feature many customers have griped about, according to the report.

The report wasn't all bad news for Microsoft, however. Despite the lowered expectations, Microsoft remains "well-positioned strategically versus its traditional competitors and in a reasonably solid position to fight off its newer rivals," according to the report.

Analysts also raised their revenue expectations for fiscal 2010 by $429 million to reflect a "modest retail bounce" related to the expected launch in the second quarter of 2010 of Windows 7. Microsoft has not set a definite date for the release of that OS, saying only that it would be available sometime in late 2009 or early 2010.

Join the PC World newsletter!

Error: Please check your email address.

Our Back to Business guide highlights the best products for you to boost your productivity at home, on the road, at the office, or in the classroom.

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Elizabeth Montalbano

IDG News Service
Show Comments

Most Popular Reviews

Latest News Articles

Resources

PCW Evaluation Team

Azadeh Williams

HP OfficeJet Pro 8730

A smarter way to print for busy small business owners, combining speedy printing with scanning and copying, making it easier to produce high quality documents and images at a touch of a button.

Andrew Grant

HP OfficeJet Pro 8730

I've had a multifunction printer in the office going on 10 years now. It was a neat bit of kit back in the day -- print, copy, scan, fax -- when printing over WiFi felt a bit like magic. It’s seen better days though and an upgrade’s well overdue. This HP OfficeJet Pro 8730 looks like it ticks all the same boxes: print, copy, scan, and fax. (Really? Does anyone fax anything any more? I guess it's good to know the facility’s there, just in case.) Printing over WiFi is more-or- less standard these days.

Ed Dawson

HP OfficeJet Pro 8730

As a freelance writer who is always on the go, I like my technology to be both efficient and effective so I can do my job well. The HP OfficeJet Pro 8730 Inkjet Printer ticks all the boxes in terms of form factor, performance and user interface.

Michael Hargreaves

Windows 10 for Business / Dell XPS 13

I’d happily recommend this touchscreen laptop and Windows 10 as a great way to get serious work done at a desk or on the road.

Aysha Strobbe

Windows 10 / HP Spectre x360

Ultimately, I think the Windows 10 environment is excellent for me as it caters for so many different uses. The inclusion of the Xbox app is also great for when you need some downtime too!

Mark Escubio

Windows 10 / Lenovo Yoga 910

For me, the Xbox Play Anywhere is a great new feature as it allows you to play your current Xbox games with higher resolutions and better graphics without forking out extra cash for another copy. Although available titles are still scarce, but I’m sure it will grow in time.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?