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Microsoft: Vista Shipments On Track, For Now

Microsoft: Vista shipments on track, for now

Friday, July 28, 2006; Posted: 11:23 a.m. EDT (15:23 GMT)


Microsoft has already postponed the release of its new Windows for consumers until early 2007.

REDMOND, Washington (Reuters) -- Microsoft Corp. said on Thursday it sees no reason why its new Windows Vista operating system would be delayed, but it stopped short of committing to its previously stated launch target.

"We will ship Windows Vista when it is available," Kevin Johnson, co-president of Microsoft's platforms and services unit, said at the company's annual financial analyst meeting.

"However, we are going to ship the product when it is ready and we are just going to take it milestone by milestone," he said of the upgrade to Windows, which sits on more than 90 percent of the world's personal computers.

Microsoft has already postponed the release of its new Windows for consumers until early 2007 -- after the crucial holiday shopping season -- to improve the system's quality.

Vista is set to ship to corporate customers this November.

Chairman Bill Gates stoked concerns over delays last month by predicting there was an "80 percent" chance that Vista would ship on time.

Uncertainty over when Microsoft will begin benefiting from the surge in revenue growth that typically accompanies a major Windows software upgrade led Microsoft's shares to dip as much as 60 cents, or 2.5 percent, to as low as $23.77 in afternoon Nasdaq trading.

Goldman Sachs analyst Rick Sherlund said the cautious comments represent a delayed confirmation of his thesis that Microsoft will not begin to see revenue from the general availability of Windows Vista until March or April of 2007.

"When they hesitate, that's confirmation we were right," he said. Microsoft has consistently been this cautious in the past, an acknowledgment of its history of slipping a few months beyond initial targets for major software releases, he said.

"They hedged, they definitely hedged," said another Wall Street software analyst, who asked not to be named, of Microsoft's comments regarding its Windows Vista plans.

Johnson said he sees revenue from the core desktop Windows business growing 8 percent to 10 percent in the current fiscal year ending June 30, 2007. Windows, nearly a third of Microsoft's total revenue, should generate between $14.3 billion and $14.5 billion in fiscal 2007, he said.

"Explain why I'm paying 20 times for a stock that is growing at 10 with a whole lot of investments that are not really going anywhere," said Greg Palmer, head of equity trading at Pacific Crest Securities.

Chief Executive Steve Ballmer told analysts and reporters at the company's annual financial analysts' meeting here that Microsoft is confident it can build two great new businesses -- online services and entertainment -- on top of its industry-dominating desktop and server software businesses.

"We see incredible amounts of opportunity," Ballmer said.

The giant software company also reiterated that it expects to maintain its double-digit revenue growth in the coming year. Last week, Microsoft had forecast revenue in the fiscal year ending in June 2007 to grow 12 percent to 14 percent, to between $49.7 billion and $50.7 billion.

The new Microsoft is being built on "four pillars," Ballmer said. Upgrades to the company's two core products -- the Windows operating system and Office applications suite -- should act as engines to drive growth and buy it time to erect two new pillars -- its Internet and Xbox game businesses.

Underscoring the leadership transition that is taking place at the company, Bill Gates, the company's co-founder and chairman, is missing from the annual analysts' meeting for the first time ever. He is vacationing in Africa, Ballmer said.

In mid-June, Microsoft announced that Gates planned to move from full-time involvement to part-time in 2008. The company split Gates' technology responsibilities between Chief Software Architect Ray Ozzie and Chief Research and Strategy Officer Craig Mundie.
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