Is Windows XP Harming Vista Growth?

Windows Vista could mark a turning point for Microsoft: it may be the first desktop operating system from Redmond that suffers on the sales side because its predecessor works so well.

Vista was released to business in November 2006, and to consumers last Jan. 29. Since that time, Microsoft has touted its success, bragging about the number of licenses sold. But lately, evidence has begun to mount that Vista isn't selling like hotcakes, and it's due in part to satisfaction with XP.

The latest, and most striking, indication of XP's continued strength, and Vista's softness, was given by Microsoft CFO Chris Liddell during a conference call last Friday to discuss the company's Q4 earnings. While trumpeting Microsoft's first-ever year of gross income topping the $50 billion mark, Liddell also said that the company changed its forecast of revenue from its desktop OSes in Fiscal Year 2008, revising Vista's revenue down from 85 percent to 78 percent, and XP's revenue up from 15 percent to 22 percent. That means Microsoft expects XP sales to be 50 percent stronger and Vista sales to slide by 50 percent in the fiscal year that just began.

Market research firm Gartner sees a similar trend.

"The release of Microsoft Windows Vista operating system at the end of January has, so far, failed to stimulate the market in the way many hoped," George Shiffler, research director for Gartner's Client Platforms Markets Group, stated in a recent press release. "Our market data suggest Vista has had very limited impact on PC demand or replacement activity. We don't see Vista having a significant effect on these going forward unless Microsoft becomes much more aggressive in its marketing efforts."

Vista, naturally, will have a great deal of momentum due to OEM distribution in new computers. But even in the sales channel, clamor for XP continues. Dell, for example, agreed in April to reoffer XP as an OS alternative on six different consumer PC and laptop models. Dell said in a blog entry that the decision was "based on your feedback." "We heard you loud and clear on bringing the Windows XP option back to our Dell consumer PC offerings," said an entry titled, "DON'T ELIMINATE XP JUST YET."

Some analysts also claimed that Microsoft's much-ballyhooed statistic of 40 million Vista licenses sold in the first few months was overinflated, and not reflective of Vista's popularity.

One of those was Market research firm In-Stat, which said in a recent report that PC sales haven't been significantly impacted by Vista's release. Sales have instead remained steady, following typical sales trends, said Ian Lao, a senior In-Stat analyst and author of the report.

"If I were to look at Vista as a demand creation agent for PCs it's not there," Lao said in a May interview.

That doesn't mean Vista is a poor OS, however. It just may be a situation that consumers and businesses are happy with what they have; which, in most cases, is still XP.

"With each [new] version of Windows, it gets harder and harder to find features and improvements that will drive upgrades," said analyst Matt Rosoff of independent research company Directions on Microsoft.

There were good reasons, many of them stability- and security-based, to upgrade from Windows 95 and Windows 98 to Windows 2000. Then along came Windows XP, which for the first time united consumer and business desktop OS offerings on the reliable Windows NT codebase. With Service Pack 2's further upgrades in security, Microsoft finally had an OS that seemed to satisfy users.

"People came on board with XP SP2," Rosoff explained. "It's efficient; all the drivers are there; it works as it's supposed to work. It's been out five years now."

And while Vista offers some significant advancements, like Instant Search, Rosoff said that he doesn't see tremendous room for improvements. "There's not that much you can do in an OS," he said.

But that doesn't mean Rosoff is biased against Vista. In fact, he just bought a new PC with Vista preinstalled, and has few complaints.

"I like Vista. I was prepped for a bad experience, but it works perfectly. As far as an OS goes, it's great. When it's time to buy a new computer, I don't think Vista would be a reason to hold off. It seems to work very well."

About the Author

Keith Ward is editor of Virtualization Review magazine. You can contact Keith at [email protected].