Microsoft’s CFO lays out reasons why he hopes Windows revenue will rise in fiscal 2010

On the Call: Microsoft CFO Chris Liddell

SEATTLE — With businesses cutting back on technology spending and consumers favoring low-end notebooks, the average amount Microsoft Corp. brings in from selling a copy of its Windows software has fallen.

Businesses typically buy the higher-end versions of Windows, like Vista Ultimate, so Microsoft suffers when they stop. When consumers buy netbooks, they’re getting Windows XP, which is less lucrative for Microsoft.

On a conference call with financial analysts Thursday, Microsoft Chief Financial Officer Chris Liddell fielded a question about the matter.

QUESTION: You said Microsoft’s Windows revenue has the potential to grow faster than the PC market. For that to happen, average selling prices would have to go back up. How do you expect to get there? Are you predicting a big upgrade cycle with Windows 7, which arrives in October?

ANSWER: As we’ve seen, weak markets in the last couple of quarters in the last year and in particular the last quarter, average PC sales are sort of down in the traditional market 16 to 18 percent and business was disproportionately badly affected.

And because business (customers are) typically our highest ASP (average selling price) from a mix point of view, that hurt us on the downside.

On the upside, when we go into next year, when we see, if we start to see the economy improve, business spending improve, and we start to see a refresh cycle in the business PC side of things, you know, which Windows 7 should obviously help facilitate, then you start to see the reverse impact.

So hopefully business PC growth will be at or greater than consumer, and so you’ll start to see higher average selling price, units will have a higher growth rate and, hence, ASPs will go up.

Hopefully we’ll see a double impact of a better PC market year-over-year and a better mix in the types of PCs we’ll be selling relative to average selling price.