Microsoft yearns for future, customers cling to past
It can't be a nice feeling when one of your biggest customers says mean things about your product, even when your name is Microsoft and you are one of the world's largest software companies.
Earlier this week, Gianfranco Lanci - president of Acer, the world's fourth-largest computer maker - told the Financial Times that "the whole industry is disappointed with Windows Vista."
The PC company executive said Vista has not generated as many sales of new computers as it should have over the past seven months, and that the new operating system has stability problems.
According to Mr. Lanci, many Acer customers are asking for PCs with Windows XP installed instead of Vista, in part because the new software requires a much more advanced set of hardware, but also because of reported stability issues with Vista.
Are Acer's complaints just sour grapes? The PC maker was clearly expecting to sell more computers as a result of Vista, but has had to scale back its growth projections. Some might argue that's an Acer problem rather than a Microsoft problem.
Acer is not the only computer manufacturer to be distancing itself from Vista, however, nor is it the only observer to be less than impressed with the impact the new software has had.
Dell, the world's second-largest PC maker (just behind Hewlett-Packard), was planning to phase out sales of PCs with XP in favour of the new operating system, but changed its mind after more than 11,000 users voted to keep XP on Dell's IdeaStorm website.
And Gartner analyst Ranjit Atwal has said that while the PC industry has been seeing strong sales, he doesn't see Vista as being responsible for much of that growth.
"There's nothing you can say that Vista does supremely differently [to XP]," he told PCPro magazine in a recent interview.
Gartner said in a recent press release that Vista has "so far failed to stimulate the market in the way many hoped." The consulting firm said that "our market data suggest Vista has had very limited impact on PC demand or replacement activity."
For its part, Microsoft maintains that Vista is one of its most successful software launches, and that with 40 million copies sold, the new version of Windows is "on track to be the fastest-selling operating system in Microsoft's history."
The company also recently reported strong financial results, with record annual revenue of more than $50-billion (U.S.), up by 15 per cent over the previous year.
Much of the credit for that goes to Vista, Microsoft said, although the release of Office 2007 also accounted for some of the strength. Some analysts were less than impressed, however.
"Vista appears to be disappointing," Lehman Brothers analyst Israel Hernandez told the Seattle Times, noting that revenue growth for the Windows division was below his expectations.
"I think it missed most Street expectations," the Wall Street analyst said. "One quarter after the biggest product cycle in the company's history, you'd think you'd see a little more upside."
The software giant also scaled back its Vista-related sales estimates, telling analysts that it now expects the new product to account for 78 per cent of its operating-system revenues, down from earlier projections in the 85-per-cent range.
"What that seems to say is that XP has stronger legs than you would expect after the release of a new operating system," industry analyst Michael Cherry told PCWorld magazine.
Part of the reason for that, Mr. Cherry says, could be the higher hardware requirements for running Vista.
"Most of the machines I see pitched in catalogues are in the $700 range, certainly under $1,000," the analyst said. "Computers with that amount of hardware are a better fit for XP. With Vista's requirements, people may be thinking about sticking with XP, and putting less money into the hardware."
Although some of the complaints from Acer and others may be an attempt to blame Microsoft for their own shortcomings, the reality is that Vista is not dramatically better than XP, and so many customers may feel less than compelled to upgrade, particularly if XP is performing well.
That said, Windows Vista is almost certain to become the default PC operating system over the next several years, as users and businesses upgrade their computers (and Microsoft phases out support for XP, which it says it will do next year).
The only question now is how fast or slow that upgrade process will be, and at the moment it seems to be slower than even Microsoft expected.
