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Microsoft to launch revamped Office program

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CIOL Bureau
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By Reed Stevenson

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SEATTLE (Reuters) - In the last two years, Microsoft Corp. has launched nearly a dozen products and poured billions into new technologies and markets but done little with its two big money-spinners, Windows and Office.

That will change next week when the world's largest software company begins selling the latest upgrade to Office, which promises tools to stop e-mail spam and allow companies to collaborate on documents, and research information from within applications and manage data over the Web.

The upgrade to its flagship software package, which Microsoft Chairman Bill Gates will unveil during a marketing blitz in New York on Tuesday, comes just days ahead of Microsoft's September quarterly earnings report, due Thursday.

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Wall Street analysts expect Microsoft's quarterly results to provide further confirmation that personal computer sales have revived in the last half of this year and will watch to see what it says about demand next year.

With a variety of applications now included as part of the re-launched Office, Microsoft is describing the software as a "system" of productivity enhancing programs.

The revamped Office sports a sleek new look more in line with the Windows XP operating system. The biggest changes are in the Outlook e-mail program, which makes e-mail easier to read and stops spam, or unsolicited e-mail.

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Redmond, Washington-based Microsoft will also kick off a campaign to market Office as a tool to "help people work smarter and better, and enable businesses to be more profitable" to convince users to switch, the company said.

Analysts say that the main improvement in Office is not in the individual applications, but rather the capability it provides for users to work together.

"Overall, our stance is that Office 2003 is an incremental upgrade from Office XP," said Paul DeGroot, an analyst at Directions on Microsoft, an independent research firm in Kirkland, Washington.

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Office will be released in several editions ranging in price from $149 to $500. The cheapest retail price is set for academic use and the highest for the Professional Edition.

"But many customers have already paid for Office, in fact, through a new licensing program," said DeGroot.

DeGroot said Tuesday's release will be the first important test of that program, called Software Assurance, which guarantees corporate customers access to the latest versions of Microsoft's products in exchange for paying for software in regular installments.

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The previous upgrade, Office XP, did little to boost sales due to the lack of incentives to upgrade, analysts said. This experience spurred Microsoft to move to a new pricing model.

Software Assurance, introduced a year ago, lifted revenue and income and shielded Microsoft from weak corporate spending but analysts say this will make it tough for the company to show another quarter of strong yearly growth when it reports quarterly results two days after the Office launch.

Microsoft has posted double-digit revenue growth in six of the last eight quarters, but is only expected to post growth of 4 percent, its lowest in the last two years, to $8.1 billion, in the latest September quarter, according to the average analyst forecasts compiled by Reuters Research, a unit of Reuters Group Plc.

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"It will be a tough compare from last year," said Charles Di Bona, an analyst at Sanford C. Bernstein, who owns no stock in Microsoft. The research firm has no brokering or investment business but Alliance, its parent company, owns Microsoft stock.

Bernstein said that Microsoft could surprise on the upside, given signs of better than expected personal computer sales from Intel Corp. and Dell Inc.

Analysts on average forecast third-quarter earnings of 29 cents per share, compared with Microsoft's outlook for a profit of 23 cents per share and 28 cents per share a year earlier.

Much of that income is still expected to be driven by Microsoft's Windows, Office and Server software for networked computers, while the company continues to invest heavily in other areas, such as its Xbox video game console and software for small and medium-sized businesses.

After the Office launch, and the April launch of if latest Server software, Microsoft's next major product in the pipeline will be the new version of Windows, code-named Longhorn, due out in 2005 or 2006.

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