Previous page: How meaningful is it for Microsoft to boast about Vista shipping twice as fast as XP?
7. Okay, but is Vista going to help PC sales in the long run?
It's unclear. IDC analyst Loren Loverde, citing Q1 '07 PC sales that were up 10.9 per cent year-over-year, has said he believes Vista will be a major factor in helping the PC market continue growing at double-digit rates for the next two years.
But Lao believes the lift is the result of pent-up consumer demand for Vista, and as a result will last only until the middle of the summer. Vista might be a "nice new operating system with good features," he said, but overall it is not proving to be a "demand creator" for PC buyers.
8. Is Vista being threatened by Mac OS X or Linux?
Yes and no. The most recent figures by Gartner Inc. show Mac sales in the first quarter up 30 per cent year-over-year, outpacing all other vendors. Macs accounted for five per cent of the PCs sold in the United States.
Macs also make up about six per cent of U.S. computers connected to the Internet, according to WebSideStory Inc. "Mac has almost doubled," a WebSideStory analyst told Computerworld in early May, "so you know they're selling a butt load."
Linux is also gaining mindshare on the desktop, after Novell's high-profile launch of Suse Linux Enterprise Desktop (SLED) last year. And Dell Inc. has recently started to sell Ubuntu Linux PCs. At the same time, Linux's worldwide share of installed PCs remains about two per cent, with IDC's Al Gillen expecting it to reach just 2.8 per cent by 2009.
Similarly, while analysts expect the October release of "Leopard" to continue boosting the Mac OS X platform, even the most bullish predictions only have the Mac grabbing about five per cent of the worldwide PC market by 2010.
Although many consumers are conspicuously choosing Mac or Linux over Windows, the bulk of PCs are purchased invisibly, by businesses. The more PCs they buy, the more likely they are to be Windows loyalists. And while leading voices such as Gartner argue that the rapid "consumerization of IT" is making enterprises buy more like consumers, even Gartner is not predicting that Macs will sweep into enterprises any time soon.
9. So where is Vista's fate most uncertain? What's Microsoft's next move?
Microsoft almost certainly employs a team of economists whose sole task is to create complex models of Redmond's revenues and profits. But the answer to the question's really not that complicated.
Microsoft needs to do two basic things. First, the company has to persuade both consumers and businesses to upgrade to Vista from XP as soon as possible. That makes it easier for Microsoft to sell them related products such as Office 2007, Exchange 2007, Longhorn Server and so on.
Once that's accomplished, Microsoft needs to get consumers and small businesses to upgrade to more expensive 'premium' versions of Vista - preferably Vista Ultimate, though Vista Home Premium and Vista Business (for small businesses) are also good (big businesses are steered to the equally pricey Vista Enterprise edition).
As to the first task, Gartenberg isn't sure that's going to happen. Not only is Microsoft not doing enough to market Vista to buyers, it's not doing enough to woo its ecosystem, either.
"There's no real set of compelling Vista-only apps yet. And the Vista hardware is not really differentiated from XP," he said.
On the second task, early reports are more promising. According to Chris Swenson, an analyst with NPD Group Inc., demand for pricier versions of Vista is strong, especially among those buying copies of Vista in stores. That means higher average selling prices compared with XP - and meatier profit margins for Microsoft.
"The challenge going forward, of course, is to convince OEMs that they can succeed at selling higher-priced PCs using a higher-end version of Vista to more affluent customers," he said.
But unlike with XP, where a customer is locked into the version, either Home or Professional, that he originally purchased, Microsoft is letting customers upgrade their version of Vista anytime via the Internet with a click of a button. Those upgrades - which range from $79 to $199 - mean that even if most consumers opt for new PCs installed with the lowest-end Vista Home Basic version, Microsoft still has many more chances to upsell them, sales that would be pure profit for Redmond.
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