Microsoft Office $20 Billion By 2010 Target Seen As Long Shot

Although the executive who leads the Microsoft group that produces Office said this week that its revenues could reach the $20 billion mark by 2010, an analyst who tracks the suite thinks that's next to impossible.

Tuesday, Jeff Raikes, the president of Microsoft's Business Division, told reporters that a 2002 target of $20 billion in Office software sales was still "a viable possibility."

"Given the current set of products, I'm not sure what trend line he's looking at," said Paul DeGroot, the Office-oriented analyst at Kirkland, Wash.-based Directions on Microsoft.

"Raikes runs the group, so presumably he knows a lot that I don’t, but I just don’t see that the current [revenue] trends will get them to $20 billion," DeGroot added.

Raikes, who took over the Office group in 2000, staked out the $20-billion-by-2010 mark in the fall of 2002 in interviews with publications and during speeches, including one in front of the Silicon Valley Speaker Series.In Microsoft's fiscal 2002, Office contributed $10.3 billion to the bottom line. According to recent company forecasts, Office should drop $11.6 billion into the sales column during the 2006 fiscal year, which ends June 30. That's an increase of only 12 percent in five years.

To meet the $20 billion goal by 2010, Microsoft would have to ramp up Office sales 72 percent during the next four years.

DeGroot doesn't think that's likely. "I don't know how Office could dramatically drive revenues like that."

Some versions of Office have had a major impact on the Redmond, Wash. company's bottom line -- Office 2000 was the last edition to do so, said DeGroot -- but that's unusual.

"Office XP had very little impact, Office 2003 had very little impact. I think Office 2007 will give them the same small bump, but nothing more," DeGroot said.Even the confluence of Windows Vista and Office 2007 -- which will be released closely together if not simultaneously -- won't matter enough to get Raikes to his magic $20 billion, DeGroot believes.

"The Office team could not make any dependencies on what's in Vista," he noted, because the operating system's feature set has been in a state of perpetual flux. "Even though it's shipping at the same time as Vista, Office 2007 is really a Windows XP version."

Under the best conditions -- a turn-around to another edition of Office to match Microsoft's fastest-ever -- the next version of the business suite, and the first able to take advantage of Vista's technologies, wouldn't show until late 2008 at the earliest.

"You could then have the coincidence of a more finished or polished OS releasing at the same time as a new version of Office that uses that OS, but that would be a little late to ramp up revenues from $12 or $14 billion to $20 billion in just over a year," said DeGroot.

Microsoft Office 2007 won't release until later this year or early 2007, but it has been seeded to beta testers in two phases since November.0