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"We feel like we are starting to hit our stride not only in demand, but in deployment in business," says Kevin Johnson, president of Microsoft's platform and services group.

Microsoft delivered quarterly results last week that eclipsed Wall Street's most bullish forecasts, helped in part by strong demand for Vista, which was launched to non-volume customers in January.

Microsoft's figures contradict several reports of slow Vista sales. Last week, the Currys Group blamed "the lacklustre uptake" of Vista for its poor PC sales.

Microsoft has also buckled to PC manufacturer demands that the company delay the scheduled transition to Vista<

Vista growth "under-appreciated"

Bernstein Research analyst Charles Di Bona says he thinks Vista's upgrade cycle is "under-appreciated" and expects growth at the Windows business to be stronger than market expectations.

Di Bona forecasts Windows revenue to grow by 15% in this fiscal year ending in June versus Microsoft's own estimate of an increase of 12-13%.

Improved measures to curb piracy and greater adoption of higher-margin, premium versions of Vista have helped boost Microsoft's earnings.

Microsoft executives have said for years that being able to crack down on pirated versions of its software will help drive significant increases in sales. Chief Executive Steve Ballmer has said that more than 20% of its software running around the world is pirated.

As consumers use their computers more for home entertainment, Microsoft has boosted the percentage of higher-end versions of Windows. Premium versions accounted for about 75% of all Windows copies in the first quarter, compared to about 59% a year earlier, Di Bona states in his report.

Microsoft's Johnson claims the company should also see a pick-up in corporate deployment of Vista after the release of Vista Service Pack 1.