Microsoft Admits Outlook for Vista is Bleak

Microsoftis quarterly earnings call with Wall Street told the tale of two diverging franchises: MS Office is doing well, but Vista growth was just 2 percent, and the company acknowledged that Vistais future is bleak for the rest of 2008, according to Computerworld on Friday.

The mere 2 percent growth, with revenues of US$4.22B, concerned analyst Matt Rosoff. "That fell pretty far short of Microsoftis expectations. Thatis always a worry, since itis the core of the companyis business."

Worse, the most recent quarter was the second of three that saw Vista sales grow poorly or shrink, noted CWis Eric Lai.

The reason was attributed to the zooming sales of low-cost PCs, particularly netbooks, which MS has allowed to have Windows XP installed to combat Linux. Or if Vista is installed, itis a low cost, stripped down version of Vista thatis compatible with the hardware. Thatis not very profitable for Microsoft.

Microsoft hopes that the holiday season will turn things around. "We think, particularly with Christmas coming up, that overall sales will be relatively good," said Microsoft CFO Chris Liddell during the earnings call.

Apple has been hammering home the problems with Vista and the fact that Microsoft is spending a lot of money to promote Vista rather than fixing its problems.

Microsoftis hope now is that during the holiday season, with the economy in turmoil, customers will buy the expensive PC hardware needed to make Vista sales surge and generate better profits.

Earlier in the week, at a Gartner symposium, Steve Ballmer suggested that customers migrate to Vista now but that Windows 7 would be "a lot better." With corporations taking 12-18 months to roll out a compatible successor to Windows XP and struggling with Vista, Mr. Ballmeris advice likely left them gasping for breath.