Will Vista SP1 Be the Killer Application PCs Have Been Missing?

Microsoft has traditionally had an intimate connection with its OEM partners. In fact, in excess of 80% of the company's revenue for the Client division (Windows) comes from original equipment manufacturers. And in this regard, sales of the Windows client preloaded on OEM PCs make out the vast majority of the total volume of operating system sales, including the retail and system builders channels.

With Windows and OEM machines virtually joined at the hip, at the end of June 2007, market analyst company Gartner blamed the lack of a "killer application" for poor worldwide PC sales. The criticism was directed at Windows Vista, and Gartner was more than a little off with his prediction of computer shipments in 2007, having anticipated a growth of only 11% and 257.1 million units, just to see actual PC sales go as high as 271.2 million units, a jump of 13.1% compared to 2006.

"The Europe, Middle East and Africa (EMEA) region continued to be the largest PC market in 2007, helped by robust Eastern Europe and Middle East and Africa growth," said Mikako Kitagawa, principal analyst for Gartner's Client Computing Markets group, at the beginning of January 2008. "Asia/Pacific took over as the second largest PC market during the fourth quarter. 2007 showed a clear indication of the worldwide PC market landscape: strong growth in emerging regions such as Asia/Pacific and slower growth in markets such as the United States."

Also in January, during his last keynote at the 2008 International Consumer Electronics Show in Las Vegas, Microsoft Chairman Bill Gates connected the success of Windows Vista sales, (over 100 million licenses) with the growth of the computer market. "A key building block certainly for Microsoft is the Windows platform. We'll evolve that and use it as really the centerpiece building block. This actually was an incredible year for PCs. PC sales grew over 13 percent. Of course, that's a really gigantic base, and it's been amazing to see that. Next year, again, the prediction is for double-digit growth," Gates stated.

Well, Vista had its imperfections, to use an euphemism. Gates himself revealed that he wished Microsoft had polished the operating system more before shipping it. But on February 4, 2008, Vista SP1 hit RTM and will become available preloaded on OEM machines, at the beginning of April. But will the combination of Vista SP1's availability, as well as the discontinuation of license availability for Windows XP on new machines serve to push OEM PC growth over 13% in 2008? Starting with the summer of this year, Vista SP1 will simply have to carry the entire load itself.