NPD: Initial Sales of Microsoft Office 2010 'Disappointing'

Initial sales of Microsoft's Office 2010 have been a bit disappointing despite the fact that they are slightly ahead of sales trends of Office 2007 so far this year, according to Tuesday data from NPD Group.

Office 2010 made its debut on June 15, and since then, "the results are mixed," Stephen Baker, vice president of industry analysis for NPD, wrote in a blog post.

Units and dollars are down from Office 2007's initial two weeks of sales, though they are in line and slightly ahead of sales trends for Office 2007 so far this year, according to information culled from NPD's Weekly Tracking Service.

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"This fact highlights the challenges for Microsoft going forward for Office," Baker wrote. "A strong product launched into a saturated market faces considerable headwinds. Even so, sales of Office 2010 in general have to be characterized as a bit disappointing during the first two weeks."

This is likely due to the fact that the launch of Office 2007 represented a "radical new design" and was launched almost in parallel with the release of Windows Vista. Sales of Office 2007 exceeded $1.5 billion in the last 3.5 years, NPD said.

"This time Office was launched during a seasonally slow period for PC purchases which have, over time, proven to be a have a strong impact on Office sales," Baker wrote. "The combination of these factors, plus the increasingly saturated installed base likely explains most of the initial weakness in sales of Office 2010."

As a result, Microsoft is now battling the "success of its retail strategy," Baker said. Perhaps the company recognizes this, as it has "been much quieter about selling Office 2010 … without a lot of hoopla and fanfare."

What has been successful, NPD said, is the Office 2010 Product Key Card, which lets users download Office 2010 using a 25-character product key on a plastic card.

"Designed to facilitate upgrading for PC buyers, [it] has gotten off to a solid start accounting for about one-third of the unit volume," Baker wrote. "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."

Deals with retailers to sell PCs with Office 2010 pre-installed could also work to Microsoft's advantage, Baker suggested.

Baker dismissed the idea that free alternatives like to Office have impacted the product's success.

"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," Baker wrote.

The mainstream consumer currently has little awareness about these options, and have not embraced the cloud, he said. This may change over time, "but that time is not now."

"The real short-term question is how Microsoft is able to match promotional fervor, pricing, and sales to the long-term opportunity to sell incremental versions of Office into a saturated consumer marketplace," Baker concluded.

"We are confident in our Office 2010 line up of products and are excited that Office continues to be the number one selling dollar volume software product at retail," a Microsoft spokesman said in a statement, citing NPD statistics from June.