January 16, 2006 6:00 PM PST
Microsoft hits subtract button on accounting package
The company said on Monday that it is offering a $100 instant discount as well as a year of free unlimited support to buyers of its Small Business Accounting 2006 software. With the discount and a mail-in rebate, the software package was offered for as low as $49 at CompUSA this past weekend.
Microsoft said that the pricing move was an effort to draw more attention to the product and not the result of weak sales.
"We're in this for the long haul," Microsoft Business unit President Jeff Raikes said in an interview. "We didn't expect to take a significant portion of the market overnight. We're taking the early momentum and building on it."
Introduced last September, Microsoft's Small Business Accounting 2006 is Microsoft challenge to several well-entrenched competitors, including Intuit's QuickBooks and Peachtree's set of accounting tools.
However, analysts say that Microsoft has yet to make much of a dent in the market. According to NPD, which tracks retail sales, Intuit's QuickBooks accounted for 93.7 percent of November retail sales, and Peachtree had 4.5 percent. Microsoft had just 1.3 percent of retail sales for the month.
"I think Intuit is probably breathing a sigh of relief," said NPD analyst Chris Swenson. However, he said he doesn't expect Microsoft to give up. "They tend to come out with a product, figure out where its weak and improve upon it.
Raikes said that sales have met expectations, but Microsoft did not give a specific sales figure. Microsoft expects the price cut and accompanying marketing to cost roughly $10 million, on top of the $100 million that the company has already spent developing and mareting the software.
"I think small businesses have historically shown that price offers get their attention," Raikes said.
Raikes said that Microsoft had expected most of its sales would come from small businesses that did not have accounting software, but instead has seen half of its sales are from existing QuickBooks customers.
Swenson said that Microsoft's software has not been particularly visible at retail stores, while QuickBooks typically occupies prime real estate.
"They put a lot into in-store marketing," he said.
But Microsoft may have to do more than cut prices and up its advertising budget, Swenson said. He noted that both Intuit and Peachtree offer versions of their products tailored at specific industries, such as construction or retail.
"To really increase their share going forward I really think they need to copy Peachtree and Intuit with a more vertical focus," he said.
The $100 instant savings is available through April 30 through retailers Best Buy, CompUSA, Office Depot, Staples and OfficeMax. Also, Dell is shipping the software, as well as a small business version of Office that includes the accounting software on some of its small business PCs, including Dimension and Optiplex desktops and Latitude notebooks.
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