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Microsoft sees business PC, server sales picking up

Software maker expects enterprise spending to rebound this year and into 2011. Microsoft also confirms upgrade program to Office 2010 and says it's sold 90 million copies of Windows 7 so far.

Microsoft's chief financial officer said on Tuesday that the company sees business spending picking up over the next 18 to 24 months and expects to benefit as companies buy more PCs and servers.

"We feel very well-positioned for growth as the economy recovers," said Peter Klein, speaking at the Morgan Stanley Technology, Media and Telecom conference in San Francisco. Klein, whose speech was available via Webcast, said that the majority of large businesses are making plans to deploy Windows 7.

Klein Microsoft

"There will be an enterprise refresh cycle," Klein said. "It's not precisely certain when that will happen or how fast that will happen."

Klein also said that Microsoft has sold 90 million licenses of Windows 7 to date. The company had previously said it had sold more than 60 million copies as of December.

Klein, who took over as CFO in November, also confirmed that Microsoft plans to launch a program for Office 2010, where customers who buy Office 2007 ahead of that product will get a free or low-cost upgrade to the new version.

A Microsoft employee last month leaked details of such a program in a blog post, which was quickly pulled. Klein said that Microsoft will defer $300 million to $350 million in revenue from the current quarter, suggesting the program will start this month, since the quarter ends in March. Office 2010 is due to be released in June.

On the consumer side, Klein said Microsoft is excited to have both Project Natal for Xbox and Windows Phone 7 Series devices on the market in time for the holidays.

"I couldn't be more excited about Natal," Klein said. In financial speak, Klein said that the release of Natal will be good for both gaining new Xbox customers and getting existing Xbox owners to buy more software.

The company also said it expects to keep a lid on costs, forecasting operating expenses for next year in the range of $27 billion to $27.5 billion. That, Klein said, should lead to a "very good result" on both sales and earnings side.

In the question and answer part of the conference, Klein was asked about whether the company expects a challenge from the iPad and Google-based operating systems.

"There's always going to be competition," he said, but added that Windows 7 allows PC makers to build products in a lot of different shapes and sizes. Klein was also asked about whether the majority of Bing's search share gains have come from distribution deals, such as the inclusion of Bing as the default search engine on various new PCs.

Klein said he wasn't sure that accounted for the majority of the improvement, but said "certainly some of our increase in share has come from our distribution deals, which we think is a good thing." He said the real test will be whether those gains become permanent.