Microsoft in the past two quarters has been able to boost sales of Windows for PCs at a faster rate that PCs sales grew. The company might be able to repeat that in the current quarter, said Scott McAdams, chief executive at McAdams Wright Ragen. Connors may have "lowballed" the estimates because Microsoft wants to set expectations at a level he is sure the company can exceed, he said.
"The economy isn't showing any signs of life," McAdams said.
"I don't know anyone that wants to be aggressive with these numbers right now." Microsoft exceeded sales estimates for the fourth quarter by getting more companies to use its Windows 2000 program for business PCs, which costs about 50 percent more than consumer versions of Windows that most businesses used to buy.
"Having no competitors in the operating system, they can price pretty much anywhere they want," said Craig Stone, an analyst at Kayne Anderson Rudnick Investment Management in Los Angeles.
Microsoft also has sold more copies of its Windows 2000 software for running server computers, and other server programs such as database and electronic-mail software. Sales of such software rose 20 percent in the recent quarter to US$1.29 billion.
The company expects sales of server software to rise just less than 20 percent in the current period. Sales of Windows for PCs will climb "only slightly," Connors said, because of slack PC demand and because companies will wait to buy Windows XP, which will go on sale in October.
Microsoft and PC makers such as Hewlett Packard Co and Compaq Computer Corp are counting on Windows XP and the holiday sales season to help revive the ailing PC market. While some PC analysts have said the recovery may take some time, Connors says he's confident Windows XP can serve as a catalyst for the first signs of a PC boost that will pick up steam in 2002.
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