Office 2010 retail sales shaken, not stirred

Boxed software not flying off shelves, says NPD analyst

Early sales of Microsoft’s Office 2010 proved somewhat “disappointing” in the first two weeks that the software hit retail shelves, according to research outfit NPD Group.

NPD’s weekly tracking service found that units and dollars were down from Office 2007’s first two weeks of sales. Despite that, the company said Microsoft’s Office 2010 sales were “in line, and in fact slightly ahead of sales trends of Office 2007 so far this year”.

So in effect NPD is reporting mixed results for the software giant’s sales.

“This fact highlights the challenges for Microsoft going forward for Office. A strong product launched into a saturated market faces considerable headwinds,” wrote NPD’s industry analytics veep Stephen Baker in a blog post.

Retail sales of Office 2007 topped $1.5bn, or 10 million new copies of the software, for the three and a half years it was available to the consumer market, noted Baker.

“Office 2007 was a radical new design that certainly helped deliver a lot of curious buyers and it was launched nearly parallel with Vista, adding a good deal of promotional activity in the software aisle, both of which likely helped drive initial sales of Office 2007.”

In contrast, he said that Office 2010 was launched during “a seasonally slow period for PC purchases”.

The decision for Microsoft to release retail versions of its software separately from launching it with Windows 7, which hit the shelves in October 2009, may have put a slight dent in initial sales, Baker said.

He added that the success of previous versions of Office could in fact affect sales of Microsoft’s latest productivity suite release.

“The key card product, designed to facilitate upgrading for PC buyers, has gotten off to a solid start accounting for about one-third of the unit volume. This is important because we do believe that the success of 2007 and 2003 at retail will make it very difficult for the boxed version of 2010 to generate much incremental retail sales volume above the trend line of the past 18 months or so,” said Baker.

As for the competition, the analyst largely dismissed cloudy rivals of Microsoft’s Office software.

“While products like Google Docs are certainly playing a part in the overall productivity software ecosystem, it is a virtual certainty that the slower than expected initial sales of Office 2010 have nothing to do with free alternatives, be they Google Docs or Office 2010’s own online version,” said Baker.

“These products have little awareness among the mainstream consumer who is the retail boxed version’s primary customer. Over time it is certainly likely that we will see some slowdown in retail sales as consumers alter their productivity software habits, but that time is not now. Mainstream consumers have not embraced the concept of the cloud, nor are they likely [to] in the short to mid-term."

He added that Microsoft's main concern right now should be with punting updates of its Office software "into a saturated consumer marketplace". ®

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