The hype surrounding last month's Vista launch could result in over-optimistic forecasts of its market penetration. 

Steve Ballmer, CEO of Microsoft, comments: "I've looked at some of the models and reports about our business and what people think it looks like, and I'm really excited on how enthusiastic everybody is about Vista. I, too, am very enthusiastic about Vista.
"But I think sometimes the enthusiasm about this great product and the excitement and the launch, 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 2008 are overly aggressive."
He explains that it's PC growth the drives Windows revenue, but in the high-growth developing markets there is a high level of piracy to factor in, while the burgeoning consumer market results in a lower average price for Windows.
"Piracy reduction can be a source of Windows revenue growth, and I think we'll make some piracy improvements this year," says Ballmer. "We have new technologies built into Windows Vista, something we call Windows Genuine Advantage we've really dialed up in capabilities with the Vista release, and I do think that that will bring some revenue growth.
"I still don't count on it to be a huge thing on the scale of this business as we really ferret through how far we can dial it up, and what that means for customer experience and customer satisfaction."
In addition, while there is strong Windows growth in the emerging markets of China, India, Brazil, Russia and others, it's off a low revenue base. And these markets have high piracy rates, Ballmer adds.
Corporate upgrades, where growth is expected to occur, in many cases has already been factored into revenue targets. "We already sold a lot of Vista corporate upgrades," says Ballmer. "That's built into a lot of our Enterprise Agreements that have previously been signed."
Ballmer adds that a new Windows release is primarily a chance to sustain the revenue the company already has.
"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.
"So, in some senses we've got to – the price of entry just to sustain today's Windows revenue is a very good R&D output in that area."