Microsoft bets Vista will have fewer bugs than Windows XP

Microsoft reported strong profits and revenue for the most recent financial quarter, amid better than expected sales of its much-maligned Windows Vista operating system.

Sales rose 32 percent to $14.4 billion, and the company's net income for the third quarter increased to $4.93 billion.

“The big story is that the uptake of Windows Vista has been at least as good as Microsoft was anticipated," said David Bradshaw, Principal Analyst at leading research consultancy, Ovum.

However, Bradshaw pointed out, Microsoft has apparently been able to sweeten the financial data by reducing the amount it sets aside for fixing bugs in Vista. In effect, the company is betting that Vista will be less buggy than XP, and therefore require fewer costly service packs, bug fixes, and updates.

Shock for Apple?

The software giant's resurgence may have been a real shock for rival Apple, Bradshaw suggested. Apple has been trying, with some success, to expand its market share.

Microsoft released few hard numbers on Vista sales, however. Instead, CFO Chris Liddel would only reveal that 85 percent of new desktop PCs shipped had Vista installed, while 15 percent used Windows XP.

"The key missing piece of information is how well this compares to the launch of Windows XP," Bradshaw said.  "Liddell would only say that the current mix was 'very healthy' and that “faster adoption of Vista is likely to be the result.'"

MS bets on fewer bugs in Vista

Microsoft is betting that Vista will be more stable and therefore cost less to support than XP did. The company has increased the rate at which it recognizes deferred revenue from Windows Vista, compared to Windows XP, Ovum reports.

"As we understand it, Microsoft puts aside some of the up-front revenue from Vista licenses to pay for updates and service packs that it makes freely available to everyone over the lifetime of the products," Bradshaw explains, "The faster rate implies that Vista is less buggy than Windows XP, so Microsoft has to allow less [money] for issuing updates.”

Vista not selling to corporate customers?

The company was noticeably silent on shipments of Windows Vista to corporate and enterprise customers - strongly implying that these are currently weak.

The most popular version of Windows Vista was Windows Home Premium, which accounted for 71 percent of OEM shipments to consumers.

Microsoft's surge in sales was helped tremendously by strong growth in PC shipments, which were up between 10 and 12 percent in the quarter, the company said.

Hidden negatives

While the results are excellent for Microsoft, they are not quite as good as first impressions and some press headlines suggest, Bradshaw believes. Apart from the reduction in cash set aside for bug fixing, the company has also benefited from the weak dollar, and other deferred revenue.

"Revenue and operating profit were both boosted by $1.67 billion from deferred revenue, mainly related to Microsoft’s technology guarantee programme, whereby certain buyers of Windows XP and Office 2003 can upgrade to Vista and Office 2007 at no cost – the deferred revenue was recognized as soon as these products were available to consumers," Bradshaw explained.

"Also revenue benefited from the fall in the dollar compared to the euro and the pound – our estimate is by around $210 million which is in line with Microsoft’s figure of 2 percent. Together these reduce growth to 15 percent, and while this is still an excellent performance for such a large company, it isn’t quite the same as 32 percent.”

That's not true!

As many readers have personally experienced, Vista is full of bugs. This is a lie because as you increase complexity and decrease dedication to the consumer, you increase the amount of bugs a system has.

Microsoft has taken a blanket they made back in the 90s and continues to add patches. Now it is a old worn-out quilt that serves only a nostalgic purpose. People should jump off this boat before it sinks and switch to a truly free as in freedom system.

Ringo Kamens

Then this is going to hit Microsoft hard!

Then this is going to cost Microsoft some big bucks later on, when the Vista support costs come in higher than they predicted. It would mean these good results are a sort of borrowing against future earnings which is still hidden.

Sell MSFT short when the bug reports start to pile up: That is, if you're prepared to put your money where your mouth is!

Who are they kidding with Vista

I don't know where they get these numbers of strong sales of Vista but where I live this thing for sure doesn't sell very well at all. In fact most of the people know that Vista is one of the worst versions of Windows that Microsoft ever produced. They compare it to Windows ME and many times they say it is even worse.

For my taste for example it just wastes too much disk space while providing no good applications, so you still have to install programs like Firefox, Thunderbird, GIMP, VLC Player and others after that. And it also uses way too much memory for what it offers. You can't work very well even if you have 1 GiB of memory.

People also don't know that there are serious restrictions built into Vista, like DRM (Digital Restrictions management). So in our parts people still stay with Windows XP and if buying a new computer choose Windows XP (providing they have any choice and Microsoft in their greedy way doesn't force them into buying Windows Vista).