Ballmer labels Vista forecasts as too ambitious

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Microsoft's chief executive Steve Ballmer has poured a little cold water over some analysts' Vista sales forecasts, claiming they're a bit too ambitious.

Speaking during a financial analysts briefing yesterday, Ballmer reiterated that he still thinks the Vista operating system (OS) will be extremely successful, but he exercised caution to those making predictions without first fully understanding how Microsoft's revenue model works.

"I've looked at some of the models and reports etc about our business and what people think it looks like, and I'm really excited on how enthusiastic everybody is about Vista. I, too, am very enthusiastic about Vista," he said.

"...People have to understand our revenue models because I think some of the revenue forecasts I've seen out there for Windows Vista in fiscal year '08 are overly aggressive.

"A new Windows release is primarily a chance to sustain the revenue we have. Every new Windows release is not necessarily a huge revenue growth opportunity, but if we don't have exciting, fantastic, outstanding Windows releases, there will be either a drop in the PC market, and/or there will be uptake of Linux and Mac and all of these other things."

Many businesses already have enterprise agreements (EAs) that build product upgrades into the contract, according to Ballmer. This, he says, will affect Vista revenue as, although those businesses might not have installed the operating system, they have, at least in part, already paid for it.

Ballmer added that Vista uptake is likely to be strong in emerging markets such as Brazil, China, India and Russia. But, he warned, as those countries also have high levels of piracy the demand might not be truly reflected in revenue as prices for some versions of the OS might be lower.

Turning his attention to non-business uses of the OS, Ballmer said: "...If anything, I think you have to think FY '08 might be slightly down versus FY '07, because we have such a large surge that we're getting post the Vista launch in these non-corporate upgrades. This is people walking into retail stores typically buying a retail copy of Vista to upgrade to. We get huge spikes in the first month, two months, three months, which all occur in fiscal year '07, and will not recur in fiscal year '08.

So, I think as I've looked at what many of you have to say about it, I think this is an area where perhaps people are somewhat too bullish."

On a separate note, Ballmer promised more great things from the company in the future and while he vowed that there won't be another lengthy wait in between releases of its software, he used the caveat that such innovation doesn't happen overnight.

"Innovation comes in many forms... And people sometimes want to pigeonhole this into what I might call the three guys in a garage form of innovation," said Ballmer.

He added: "We won't go five years again, I promise, between big Windows releases. But there are products that are so anchored to the way people work, they're not going to be three guys overnight, and we're not going to see that kind of innovation as fundamental, certainly in the progress of the operating system itself. It simply requires too much testing and too much sort of sophisticated engineering to get there. But we continue to push and push hard on the innovation front."

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