Microsoft launched Windows Vista and Office 2007 on January 30, 2007. According to Microsoft PR: "On Jan. 30 the most significant product launch in Microsoft Corp.'s history culminates in the release to consumers of the Windows Vista(TM) operating system and Microsoft(R) Office 2007." According to Steve Ballmer, the CEO of Microsoft: "These are the most amazing versions of Windows and Office ever."
Windows Vista packs innovative features including: "Aero" interface leveraging 3-D graphics that creates a translucent look and feel, as if the windows are floating in front of other objects. Vista also provides "improved security, search bars to help users find information easier and a new multimedia platform for digital video, music and pictures." Vista helps developers in more ways than ever before with the APIs and added toolkits. It took Microsoft $6 billion in creativity and development dollars, and more than five years to create Vista.
However, despite this biggest launch in Microsoft history, Microsoft stock is down more than 5% from the pre-launch hype, and more than 3% after the launch. Before the launch MSFT had peaked at $31.09 on January 24, 2007. Post launch, MSFT closed today at $29.51, or 5% down from the pre-launch hype and 3% down from the closing price of $30.48 on the day of the launch. Why is Microsoft stock down? Even the news media has had lukewarm reaction to the whole launch. Why are the investors and media not sharing the excitement of Ballmer and Gates?
I have tried to come up with the Top Five reasons on why Windows Vista has not helped move the needle on Microsoft stock, and received tepid response from the media:
Top Five Reasons on Windows Vista: Boom or Bust?
1. If it ain't broke, don't fix it.
Most consumers are quite happy with their Windows XP. Windows XP has become the de facto standard of Windows family of operating systems. And Microsoft had its work cut out to match the prowess, performance and stability of Windows XP. Windows Vista is slightly better or equal to Windows XP on the key categories of performance and stability. This means customers will take their time upgrading to Vista from XP, a rather long time.
2. Vista Security. Not.
Today, Computerworld released a story touting that Windows Vista firewall flunks the security test by an independent third party evaluator for outbound security. The much touted security features of Windows Vista are found to be hard to configure, and where it matters most, are not yet ready for prime time. Microsoft will need to quickly update the security features so that they can pass the Vista security test and win over IT and consumers alike.
3. Steve Jobs and Apple.
Apple Inc. (NASDAQ: AAPL) is also one of the top 20 Innovators of The Innovation Index, and ranked as one of the top ten innovators for 2006 as per the Innovation Index Annual Report. Apple has determined that Vista is incompatible with iPod and iTunes. Hence Apple is advising customers to not upgrade to Vista at all, and not purchase new computers loaded with Vista. Apple is also exposing the security leaks in Vista, and touting its own operating system Tiger as superior to Vista on security and other features. In short, Steve Jobs and Apple are creating enough noise for customers to rethink their Vista buying or upgrade decision, and consider Apple computers instead loaded with Tiger.
4. Microsoft botched the hype.
Microsoft had announced the business version of Windows Vista in 2006 with all the key features, and had already created a small splash. Enterprise customers had already begun trying out and deploying Vista in 2006. The consumer launch of Vista was lost in the hype of the enterprise launch of Vista. There was nothing new in the product. Everyone knew the product features. The "rolling thunder" launch effect never happened. Microsoft Marketing or strategists have perhaps themselves to blame in botching the Vista hype.
5. Microsoft ho-hum Vista projections.
"Microsoft Corp. (MSFT) said on Wednesday it expects to sell twice as many copies of its new Vista PC operating system in its first year on sale compared with the launch of its last major upgrade, Windows XP, in 2001." Sounds good if you take this PR literally. However, if you check under the hood, this growth statement is weak.
The growth, according to Reuter’s story, would be roughly in line with the global PC market, which is also expected to nearly double in unit sales between 2001 and this year. Why would Microsoft project a market growth for Vista which is only equal to PC shipments in 2007? If Microsoft is bullish on Vista, why isn't Microsoft growing at a faster pace than the rest of the PC market? Why isn't Microsoft saying that Vista will help increase PC sales, or that Vista will take marketshare away from Apple?
Bottomline
Ultimately, Vista's success will depend heavily on creating new, incremental business beyond what the world already knows (PC projections). This new business can happen if Microsoft is successful in expanding the overall PC market (creates more buyers of PCs and Vista), taking market share away from rivals such as Apple, and coaxing its current XP customers to upgrade to Vista. Only time will tell on whether Microsoft Windows Vista will be: Boom or Bust.
References:
The Innovation Index
The Innovation Index Annual Report: Chapter Two
Computerworld
Marketwatch
Reuters
Microsoft PR
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