Microsoft Corp, the biggest computer-software maker, began selling a new version of its Office package of word-processing and e-mail programs, a product that accounts for a third of the company's sales.
Chairman Bill Gates demonstrated the program, called Office XP, at a New York conference. The upgrade is the first of a slew of product releases for Microsoft this year that are designed to boost the company's slowing sales growth.
Office XP makes it easier for groups to share information and collaborate and includes a speech-recognition program. Analysts said the new features won't be enough to stimulate immediate sales of Office or new personal computers. Revenue is expected to get a boost in October when Microsoft's new version of its operating-system software, Windows XP, goes on sale.
"We won't see the same kind of sales spike as we have with some past products," said Jean Orr, an analyst at Bluestone Capital Partners who rates Microsoft a "buy." "This will have more of a gentle roll than a spike." About 90 percent of PCs already run older versions of Office, and customers often wait until they purchase a new machine to buy updated software. Budget cuts are making potential business customers more determined to squeeze maximum use out of the Office version they already own, and older versions have many of the features companies need, analysts said.
Ken Smiley, an analyst at Giga Information Group Inc, estimates that more than half of organizations using Office will begin upgrading in the first year Office XP is available. Most eventually will buy the newer programs because as their existing software ages, it becomes harder to find technical support and programs that work with it, Smiley said.
The shares of Redmond, Washington-based Microsoft fell US$0.01 to US$69.18. They have gained 59 percent this year, the best performance in the 30-member Dow Jones Industrial Average.
Microsoft Chief Executive Steve Ballmer and Gates said the new Office software and Windows XP products may help revive the PC market, where growth has stagnated this year.
"Looking forward we do see PC sales at a very strong level," Gates said in an interview. "The growth of PC sales in Asia and Europe never pulled back at all, and in the US we see signs that with Windows XP it's going to be a good year." Ballmer said he can't estimate how much the products will help the PC market and to what extent that impact will be blunted by the weaker economy.
Microsoft, which had US$23 billion in sales in its most recent fiscal year, needs to create a more stable revenue stream instead of relying on its ability to convince customers to upgrade to new products, analysts said. The company plans to offer Office, Windows and other programs through subscriptions, which will be sold for a specific term and will have to be renewed.
On May 10 the company said it will let large businesses rent programs for three years beginning in October, though Ballmer said it will be "several years" before most customers use subscriptions. Microsoft scrapped plans for an Office XP retail subscription in the US, yet expects to revive those plans someday.
Office XP goes on sale today in 15 countries. Its most touted new feature is smart tags, which let users click on a menu to get specific information while typing a file or reading e-mail in an Office program. Microsoft is creating its own smart tags and working with other companies. Office users can download different smart tags from the Internet.
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