By Michael Cohn

Microsoft CEO Steve Ballmer lowered sales forecasts for the company’s recently released Windows Vista operating system, saying analysts had set “overly aggressive” targets for the software and for new PCs containing it.

The Redmond giant began shipping Vista and its Office 2007 desktop productivity suite to enterprise customers in late November and to smaller businesses and consumers in late January (see Microsoft Launches Vista and Microsoft Debuts Consumer Vista).

VistaMicrosoft Debuts Consumer Vista

Mr. Ballmer himself had set expectations high, predicting in January that Microsoft would be able to sell five times as many units of Vista over the next few months as it sold of Windows XP, which was released in 2001.

Vista

However, an NPD Group report released Thursday found that Vista actually sold less than half as many copies as Microsoft sold of XP in its initial week, and earned about 32 percent less than XP in revenue, even though the software costs more than XP did back then.

Vista

Now Microsoft is starting to tamp down expectations on the oft-delayed operating system on which its future depends.

the launch. But people have to understand our revenue models. I think some of the Windows revenue forecasts in fiscal year ’08 I’ve seen are overly aggressive. You shouldn’t think of a huge surge in fiscal year ’08 relative to ’07. There’s a few that think we are going to do much better than PC growth.”“I’m really excited of how enthusiastic everybody is about Vista,” said Mr. Ballmer at an analyst conference in New York late on Thursday. “I too am very enthusiastic about Vista, about this great product, the excitement, and But although he thinks the forecasts are off, he still expects that computer makers will benefit from the new operating system.

“These things are out of whack,” said Mr. Ballmer. “If Vista is growing, there should be a lot of people participating.” He called for analysts to be more patient with the company and said its efforts would eventually pay off.

Vista

Nevertheless, shares of Microsoft fell $0.59 to $28.87 in recent trading. The stock has dropped about 5 percent since the Vista consumer launch on January 30. When Microsoft released Windows XP in October 2001, the stock rose 7 percent in 18 days.

The stock has dropped about 5 percent since the Vista consumer launch on January 30. When Microsoft released Windows XP in October 2001, the stock rose 7 percent in 18 days.

Some analysts at firms such as Goldman Sachs have predicted sales of $16.3 billion for the year starting in July. Gartner predicts 75 million copies will be sold within a year.

Canaccord Adams lowered its expectations for Microsoft’s fiscal year 2008 after attending Mr. Ballmer’s presentation. The firm reduced its top-line expectations by $600 million to $56.12 billion and the bottom-line earnings per share by $0.04 to $1.67 per share.

But the firm is still upbeat on Microsoft. “Despite the slight pullback in revenue growth estimates for F08, we see no reason to diminish our bullish stance on the stock,” wrote Canaccord Adams analysts Peter Misek and Eyal Offir in a research note. “The launch of Vista, Office, and SQL [Server] 2007 provides a renewed annuity scenario for the company, which enables management to direct resources toward expansion in other growth areas.”

Vista

Russian Principal off the Hook

In other Microsoft news, the Russian school principal who faced the threat of a term in a Siberian prison because he made the mistake of buying computers containing pirated Windows software was convicted by a Russian court (see Putin, Gorby Petition Gates).

Putin, Gorby Petition Gates

But the judge did not impose any sentence on the schoolteacher/principal, Aleksandr Ponosov, because the judge did not find that the loss to Microsoft was substantial compared to the company’s overall earnings.

Russian President Vladimir Putin had publicly denounced the charges against Mr. Ponosov, and former Soviet Union President Mikhail Gorbachev wrote an open letter to Microsoft Chairman Bill Gates earlier this month appealing for him to intervene in the case. Microsoft insisted it was not pursuing any charges against Mr. Ponosov, however. Police had seized a dozen PCs from Mr. Ponosov’s school but later returned them so students could take their computer science exams.