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December 29, 2005

Contrarian Predictions for Microsoft in 2006

Posted by David Hunter at 10:10 PM ET.

Reading some of the 2006 predictions for Microsoft, I’ve been struck by how many concern issues that are largely ephemeral to Microsoft’s financial performance. I enjoy the latest technical buzz as much as anyone, but I think that occasionally a “green eye shade” view is in order. To that end, here are some predictions for Microsoft in 2006 that are contrary to the usual flow of techie chatter, but for which I believe a reasonable case can be made. They are intentionally ordered by recent Microsoft business unit profits.

Client OS: Windows Vista will be irrelevant except as an illustration that Microsoft is committed to its franchise

All except for a single digit share of new client PCs ship with a Windows client OS. There’s no room for growth in market share and results are thereby tightly locked to PC shipments. Vista won’t be compelling enough to inspire large numbers of upgrades or new PC purchases (or delay PC purchases if it is late) and it’s doubtful that the pricing will differ significantly from Windows XP. Net: business as usual in the client OS space.

Office (aka Information Worker): Office 12 will be similarly irrelevant

The Office 12 story isn’t as clear cut as that for Vista, but a slick new UI won’t change the fact that office suite software is a mature market in which Microsoft holds all but a minuscule share. Office servers and the use of Office as a front-end for business software are too small or too new to change the results. Net: Information Worker results will be basically flat as usual.

Server & Tools: The growth surge will continue

Being a contrarian doesn’t mean that there isn’t some good news! Server & Tools has been a growth bright spot recently and there’s no reason why that shouldn’t continue in 2006. There’s market share to be gained in servers, money to be made with the currently favorable IT spending climate, and S&T just went through a product refresh cycle including SQL Server 2005. Net: Another good year.

Everything else: Irrelevant except as investments in the future

Sorry about that. Even MSN, which has started making money from the growth in online advertising, isn’t going to amount to more than small change in the overall picture. Worthy of note, I suppose, is that Xbox 360 will likely turn in some magnificent losses as part of the strategy to gain market share, but they’re not important overall. Net: These are just long term investments although one of these years MSN might break from the pack.

Filed under Financial, General Business, MSN, OS - Client, Office, Office 2007, Servers, Tools, Windows Vista, Xbox

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One Response to “Contrarian Predictions for Microsoft in 2006”

  1. Microsoft News Tracker » Microsoft Office earnings top out Says:

    [...] Microsoft hopes that the new user interface for Office 12 will make a difference, but I continue to be skeptical. Filed under Office, Office 12, General Business, Financial Listen to this article   [Permalink] [...]

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