Windows Vista, Office 2007 boost Microsoft sales

Microsoft announced that its fiscal third-quarter profit jumped 65%, helped by stronger than expected sales of Windows Vista and Office 2007, and by upgrade coupons for the operating system issued over the holidays.

Chief Financial Officer Chris Liddell said consumer sales of Vista surpassed the company’s own expectations by $300 million to $400 million, while Office 2007 sales were $200 million better than expected. Microsoft’s latest earnings were also lifted by a deferral of some marketing spending, he added, though this would fall in the current quarter instead.

“This (3rd) quarter marked the consumer launches of Windows Vista and the 2007 Microsoft Office system, and we are delighted with the positive customer response these products have received,” Chief Operating Officer Kevin Turner said in a statement.

In January 30, Microsoft launched and started selling Windows Vista. Its “client” division, responsible for Windows, brought in $5.27 billion in sales, 67 per cent higher than a year ago.

The client division sales “are surprisingly ahead of where we thought they would come in,” said Sid Parakh, an analyst at McAdams Wright Ragen. “They might indicate Vista is doing fine.”

“The strength of Vista is really driving this,” said Kim Caughey, analyst at Fort Pitt Capital Group. She added that the company had set “manageable expectations for the full year 2008, which generally allows them some headroom.”

For fiscal 2008, Microsoft forecast earnings of $1.68 to $1.72 per share, with revenue of $56.5 billion to $57.5 billion.

The company’s 2008 business year, which starts in July, will be the first full year of earnings to benefit from consumers buying new computers loaded with Vista and Office 2007, or companies upgrading computer systems.

Microsoft expects the latest versions of its two flagship products to underpin profit growth over the next few years. Those two product lines alone account for more than half of Microsoft’s total revenue and a majority of its profits.

Microsoft told analysts it expects Vista to account for 85 percent of sales in fiscal 2008, with XP still amounting to 15 percent of sales.

“We’re optimistic, but we don’t want to get ahead of ourselves,” Colleen Healy, Microsoft’s general manager of investor relations, said.

All this make sense why Microsoft keeps on releasing new software replacing its old one versions. Clearly, there is more money for every new releases. No wonder that even before Vista was officially release Microsoft has already started developing Vienna to replace Vista. That’s cool and that sucks. I guess that’s how Microsoft stays in business.

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