The negative perception of Windows Vista may be catching up to Microsoft in the financial sphere. Earlier this month, a financial analyst firm lowered its revenue estimate for Microsoft's 2008 and 2009 fiscal years, citing a negative perception about the OS that is affecting its adoption by businesses.
The research report, by Sanford C Bernstein analysts, also hinted at the release date for the next version of Windows, code-named Windows 7. In the report, the analysts say they expect Windows 7 to be released in the second quarter of 2010.
In the report, analysts Charles J Di Bona, Maureen Murphy and Mariel A Hardi lowered their revenue estimates for Microsoft by US$49 million (NZ$64 million) for fiscal 2008 and by US$395 million for fiscal 2009. While the 2008 revision didn't affect the firm's earnings estimate of US$1.91 per share for that year, it lowered its 2009 estimate to US$2.17 from US$2.20, according to the report.
"Support for Vista has been battered across all enterprise sizes and corporate constituencies," the report states. "As a consequence, the Vista cycle looks likely to be materially less robust than indicated in our prior survey", the analysts say.
The key factor has been "overwhelmingly bad publicity" for Vista, particularly about the option for enterprise licencees to downgrade to XP from Vista, and the potential for companies to skip Vista in favour of Windows 7.
The downgrade option has been especially troublesome for Microsoft, which in some cases has had to extend the time it will sell XP due to customer demand.
The negative publicity has left businesses with a perception that there is no good reason for them to upgrade, according to the Bernstein report. "Almost no feature of the new OS is now seen as a meaningful positive driver for adoption," the analysts say.
Independent analyst Brian Madden concurs. "From a company standpoint, there is not a single damn reason people should use Vista," he said. "Will you sell another widget because of Vista? No. And besides, Vista has so many hardware requirements that you increase your costs."
The Bernstein report also cites costs associated with Vista, which would require some companies to upgrade their desktop hardware because of the increased system requirements, a further impediment to adoption.
Moreover, some features of Vista that Microsoft promoted as key reasons to upgrade, such as security, have been undermined by negative publicity around tools like User Account Control, a new security feature many customers have griped about, according to the report.
The report wasn't all bad news for Microsoft, however. Despite the lowered expectations, Microsoft remains "well-positioned strategically versus its traditional competitors and in a reasonably solid position to fight off its newer rivals," according to the report.
The Sanford C Bernstein analysts also raised their revenue expectations for fiscal 2010 by US$429 million to reflect a "modest retail bounce" related to the expected launch in the second quarter of 2010 of Windows 7. Microsoft has not set a definite date for the release of that OS, saying only that it will be available sometime in late 2009 or early 2010.