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Steve Ballmer is blaming software pirates for the premium pricing Microsoft charges on products like Office and Windows. But he speculated that the advent of web-based services could see a lowering of Microsoft's charges.

The rise of subscription-based pricing - a charging mechanism favored by a crop of start-ups and software as services (SaaS) companies in Silicon Valley - could help squeeze out the opportunity for pirates to rip off software, Ballmer said.

The "tight subscription relationship" SaaS produces between supplier and customer could cut down on piracy, according to Ballmer. "With less piracy, with more proper, use it certainly creates an opportunity for us and for other software companies to take a look at also reducing the cost," Ballmer told an industry conference in Paris.

Ballmer aired his views as Microsoft prepared to release its third-quarter financial results on Thursday. Thompson Financial expects a 15 per cent increase in revenue to $11bn and earnings per share of $0.33, slightly higher than Microsoft's own guidance that was issued in January.

Today's results will be piqued by the fact Microsoft typically uses its third quarter to make projections for the coming fiscal year, starting in July. The next year's results should start to factor in the delayed Windows Vista, now due in January, and Office 2007, due in "early" 2007 since it was also pushed back. Thursday afternoon's predictions should provide some insight into how much Microsoft is expecting to make from Windows Vista and Office 2007.

Ballmer last year promised Wall Street that Microsoft would charge a premium to use certain versions of Windows Vista. While Microsoft has not yet announced Windows Vista pricing, Goldman Sachs analyst Rick Sherlund has estimated Microsoft could claw in an additional $1.5bn a year by charging for "premium" editions.

Specifically, Sherlund believes 75 per cent of home uses will adopt Windows Visa Home Premium instead of Windows Vista Home Basic, because of the new Aero interface, and ability to burn DVDs - features that are lacking in the weaker edition.®

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