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News > Technology
Microsoft Office XP debuts
May 31, 2001: 1:12 p.m. ET

Software maker sees new product as catalyst for future growth
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NEW YORK (CNNfn) - Microsoft Corp. on Thursday officially launched the latest version of its "Office" suite of productivity applications which executives are hoping will stimulate sales and help it advance its recently adopted Web-centric business strategy.

Called Office XP, the new software includes enhanced features that enable users to link to the Internet and collaborate with co-workers on projects.

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graphicBill Gates talks about Microsoft's new version of business software applications.
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Microsoft co-founder and Chairman Bill Gates told CNNfn Thursday that the new software which includes applications such as the "Word" word-processor and "Excel" spreadsheet will likely boost sales in Microsoft's Office division, which represents roughly 30 percent of the company's total revenue. He did not provide a specific target, however.

"We'll definitely have a big Office year this year," Gates said.

"Whenever we come out with a new version, and particularly with this version, you'll see an increase in revenue because you get that installed base coming in and you get people who have been reluctant thinking about whether they should buy the product saying, 'That is the hot new thing,'" Gates added.

Office has traditionally been one of Microsoft's biggest money spinners, but analysts say market saturation has slowed growth over the last few quarters. And since it is being launched so soon after the introduction of its predecessor, Office 2000, some are dubious about the rate of adoption.

Others are expecting those who are considering upgrading to Office XP from prior version to wait until Microsoft introduces its next-generation Windows operating system, called Windows XP, due to be released in October.

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Merrill Lynch analyst Henry Blodget told his clients Thursday that the success of Office is critical for Microsoft because it generates more revenue and operating profit than any other single product line. However, he added that the immediate effect on Microsoft's bottom line is likely to be minimal.

"We continue to view [Office XP] as a 'nice-to-have,' not a 'must-have,' especially in a weak economy," Blodget said in a note to clients.  "We have therefore baked only modest impact from the launch into our estimates."

Executives from Microsoft touted the new software during 100 separate events around the world. Gates was in New York alongside customers including Amazon.com. and Ford Motor Co. At the same time, Steve Ballmer, Microsoft's chief executive, addressed an audience in Chicago.

One of the key new features in Office XP is what Microsoft is calling "Smart Tags," which provide users with the option of pulling down additional information from the Web. In addition, certain versions of the software will allow users to work collaboratively on projects by sharing documents over the Internet.

Those new features tie in closely with Microsoft's so-called ".NET" strategy, under which it is aiming to extend its Windows and Office franchises onto the Internet.

Anticipating that network-based computing will become more pervasive in the future, Microsoft recently has shifted its overall business strategy, which is now grounded on a software technology called XML. That stands for Extensible Markup Language, and it allows for the exchange of data across disparate computing devices and software platforms.

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Bill Gates
Co-founder and Chairman, Microsoft
In late March, Microsoft demonstrated the first concrete elements of its .NET strategy when it unveiled array of software aimed at helping consumers manage and share personal information on the Internet.

Nicknamed "Hailstorm," the new software provides a set of building-block services designed to link with other companies' software and enable users to access and manage personal data on the Internet using a wide range of software applications and computing devices. It is expected to be available to consumers next year.

Elements of Hailstorm have been embedded in Microsoft's Windows operating systems and Office products.

"As people see how we've broken down the boundaries between Office and the Internet; as they see how we let them share information ... the things we've done with e-mail, the things we've done with the recovery capabilities, they'll see that this is a very big launch of Office," Gates said.

Shares of Microsoft (MSFT: up $0.60 to $69.79, Research, Estimates) edged up slightly in light volume on Nasdaq early Thursday afternoon. graphic

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