Seven Businesses Ready for FY'06

Next year’s growth will come from major product launches and long-term corporate licensing agreements, according to Microsoft executives. Speaking at the company’s annual Financial Analyst Meeting, executives also painted an optimistic picture for the next five years, saying that hosted subscription services, Internet advertising, and emerging economies would contribute to revenue growth. However, the company acknowledged that new expenditures, including acquisitions, will be necessary to compete in these new areas, suggesting that profits will grow more slowly than revenues.

In fiscal year 2006 (which began July 1, 2005), the company has particularly high hopes for SQL Server 2005 and Xbox 360, and corporate prepurchases of upgrades to the next versions of Windows and Office. Strikingly, many of the cautionary themes of past years’ Financial Analyst Meetings were absent in 2005. The company spent almost no time discussing legal threats, suggesting that it believes the worst fallout from antitrust litigation is in the past, and executives predicted that Linux growth will taper off and that some Linux adoptees will switch back to Microsoft solutions. Indeed, the main challenge for Microsoft now seems to be Microsoft itself: as the company’s core products become mature in their features and its traditional markets become saturated, the company must convince existing customers to upgrade or expand their purchases and must push into uncharted waters.