After addressing analysts on Thursday, they took him at his word, issuing cautious but optimistic research notes that, regardless, helped knock almost 3% off Microsoft’s share price on Friday.
People have to understand our revenue models because I think some of the revenue forecasts I’ve seen out there for Windows Vista in fiscal year ’08 are overly aggressive, Ballmer said at the meeting.
He told analysts that much of Microsoft’s operating systems sales growth comes from people buying new PCs, but that analysts growth models for Microsoft are more ambitious than their models for PC makers, something he called a weird disconnect.
There’s a disconnect between what people think is the growth of the PC market and what they think is Vista growth, he said. So, either you have to increase your forecast for the total PC market, and then Vista will do just fine, or those two things are out of whack.
If Vista is going to drive a major sort of surge in PC market growth rate, you would think that would also show up in what people [analysts] think about HP, Dell, Intel, he said. My basic assumption is we’ll see a small surge.
The company had made discouraging noises about Vista earlier in the week, issuing a short statement asking people to stop speculating on what the next Windows might look like and when it might come.
Vista was released to new PC buyers and retailers on January 30, and there was intense speculation on how much excitement Microsoft had managed to create.
In terms of retail sales of Vista in a box, Ballmer said he believes most of that up-tick is concentrated in the first few months of the software going on sale. He doubted that this will carry over into Microsoft’s fiscal 2008, which begins in July 2007.
Analysts estimates for fiscal 2008 growth in Microsoft’s client business unit, which includes Vista, is around the 9% mark. Despite Ballmer’s caution, analysts stuck to their estimates Friday.
Ballmer said that analysts should consider that rather than creating huge spurts of new growth a new Windows release is primarily a chance to sustain the revenue we have.
Every new Windows release is not necessarily a huge revenue growth opportunity, but if we don’t have exciting, fantastic, outstanding Windows releases, there will be either a drop in the PC market, and/or there will be uptake of Linux and Mac and all of these other things, he said.
On Apple, Ballmer acknowledged that the company has gained market share against Windows-based PCs, but suggested this is largely an image factor.
The number one reason Apple has grown share is because they’ve had the sexiest high-end notebooks in the marketplace, he said. I think as you start to see the kind of higher end nice notebooks, sexy, high-end notebooks from Toshiba, from HP, from Dell, from others, that combination with Vista is going to put a lot of pressure back on Apple.
