A Brisk Start for Office 2007

A common refrain among tech analysts last year was that Microsoft’s greatest competitor to a new release of Office was Microsoft itself. Their reasoning? Most previous releases worked just fine, performed the basic functions people needed and there was no compelling reason to upgrade to a new release.

But it looks like Office 2007 is defying the conventional wisdom, at least out of the gate. Initial sales figures analyzed by The NPD Group show it’s off to a big start when compared to the launch of Office 2003.

In its first week of launch, Office 2007 unit shipments increased 108.6 percent and dollars increased 106.3 percent compared to the first week of Office 2003 sales. When comparing the first full month of sales for both releases in just the retail channel, Office 2007 unit shipments increased 61.3 percent and dollars increased 97.8 percent compared to Office 2003.

And those numbers are somewhat conservative, given that one participating retailer did not deliver sales data to NPD. When those figures come in, the increase should be higher.

“With almost zero advertising and marketing until the January 30, 2007 retail launch, I expected U.S. commercial license sales of Office 2007 to be significantly below the sales of the previous version in its first full month on the market. They weren’t. Sales of Office 2007 were significantly better,” wrote Chris Swenson, director of software industry analysis for The NPD Group in a research report.

He noted that not only were unit sales up but so were the total dollars spent, an average of $55 or more. “To me, that means Microsoft has been successful at migrating people upstream to try out a higher version of the Office family. That’s been their strategy, to add value to those high end products and get people to buy up,” he told internetnews.com.

However, Microsoft couldn’t upsell everything. Office 2007 Ultimate Edition, which lists for $679, only accounted for a single digit percentage of sales.

Despite its price, Swenson thinks it’s a great deal because it has so many expensive extras, like Groove Networks, InfoPass, Access and Publisher. “I don’t think Microsoft has done a good job communicating the value in that box,” he said.

Then again, he thinks Microsoft has been spending most of its efforts on promoting Vista than it has on Office 2007, but expects that to change around March.

Whether Microsoft can maintain the momentum remains to be seen. “But I will say this: annual dollar volume for office productivity suites kept growing from 2003 to 2006. So, I think the data indicates that it is very likely that Microsoft will be able to continue to grow dollar volumes in this very mature category,” said Swenson.

Yancey Smith, Microsoft’s group product manager for Office, wouldn’t make any predictions on future growth. “Microsoft is pleased with the initial response to Microsoft Office 2007,” he said in an email sent to internetnews.com. “We’re excited about the benefits Office 2007 will bring to our customers and to our partners in retail, in the OEM community and in the industry at large.”