Microsoft is making its antipiracy check mandatory for Office.

The company introduced Office Genuine Advantage in April as a voluntary way for people to ensure that they only used licensed and legal copies of the productivity software. But as of Friday, Office Online templates downloaded from within Microsoft Office System 2007 applications will require validation of the Office software in use.

And as of January 2007, people will also have to complete the authentication test if they want to use Office Update.

The move means that users who are caught using software that can’t be proved to be 100 percent legal won’t get access to add-ons and updates from Microsoft. Those denied access because their version does not pass the authentication test will need to prove that their software is valid before they can proceed.

Microsoft says it will “continue to provide a complimentary copy of Microsoft Office to help qualifying customers who unknowingly acquired counterfeit versions of Microsoft Office 2003.” But users will need to “fill out a counterfeit report, provide proof of purchase and send in their counterfeit CDs” to prove their entitlement to a free replacement copy of Office.

Customers who have “unknowingly acquired” a counterfeit version of Office and can’t provide these details will have to pay a license fee, Microsoft said. This will be $359 for the Office Genuine Advantage kit for Microsoft Office Professional Edition 2003, while the Microsoft Office Small Business Edition 2003 costs $269 and the Microsoft Office Student and Teacher Edition 2003 costs $139. This offer is available for November, the company said.

Tony Lock of analyst firm Sageza said that the licensing changes were not unexpected. He believes it makes sense for Microsoft to bring its licensing strategies for Office and Windows in line. “But I think most of the problems come from Windows and not Office,” he said.

Microsoft has escalated its battle with software pirates during the past two years through the “Genuine Advantage” add-ons for Windows and Office, its biggest cash cows. The company is now expanding its push by putting antipiracy features in its new products and taking more drastic action when it finds that a product was illegitimately acquired.

Earlier this month, Microsoft owned up to problems with Windows Genuine Advantage when some validated customers were denied access to their applications because of a software problem.

Microsoft Corp. posted an 11 percent rise in quarterly net profit on Thursday, boosted by a strong performance at its database division and shrinking losses from its Xbox 360 video game console.

The world’s largest software maker also said it will defer revenue of $1.5 billion related to the upcoming launches of a new Office software suite and Windows Vista, the first major upgrade of its operating system in five years.

Including the effects of the deferral, which will reduce profit this quarter by 11 cents per share, Microsoft forecast second-quarter profit of between 22 cents and 24 cents per share on revenue of $11.8 billion to $12.4 billion.

Analysts, on average, had forecast second-quarter earnings of 36 cents per share on sales of $13.4 billion, according to Reuters Estimates.

In after-hours trade, Microsoft shares rose to $28.50 from a close of $28.35 on Nasdaq.

The revenue deferral stems from a coupon program announced this week to allow buyers of personal computers to upgrade to Vista and Office 2007 when they debut next year.

“People might be concerned that operating income may drop in the next quarter, but what’s happening is that they’re deferring revenues for an upgrade program to Windows Vista,” said Toan Tran, an analyst with Morningstar.

“It really has no effect on the cash flow Microsoft has. It just won’t be recognized until the third quarter.”

The company also gave a full-year earnings outlook range of $1.43 to $1.46 per share on revenue of between $50 billion and $50.9 billion. Wall Street analysts have been looking for a full-year profit of $1.44 per share on sales of $50.3 billion.

Microsoft Chief Financial Officer Chris Liddell told Reuters in an interview that the full-year outlook was stronger than it might first appear.

A $20 billion tender offer for shares set for August was not fully completed, leaving a larger share base that would lower earnings by 4 cents per share more than previously anticipated, he said. But the company aimed to make that up with a better performance and other share repurchase programs.

“That’s primarily due to the fact that the tender was not fully subscribed, but we’re obviously very happy that we are able to maintain the range we previously had,” Liddell said.

“The way I look at it, we are able to make up all of that shortfall.”

In its first quarter ended Sept. 30, net profit was $3.48 billion, or 35 cents per diluted share, up 11 percent from $3.14 billion, or 29 cents per diluted share, a year ago. Sales rose 11 percent to $10.8 billion in the quarter.

Analysts, on average, had forecast earnings per share of 31 cents on revenue of $10.7 billion, based on Reuters Estimates.

Microsoft posted sales and profit growth at its server and tools business, powered by a 30-percent year-on-year rise in sales of its database software platform, SQL Server, and solid demand for its Windows server software.

The company also said it had sold 6 million Xbox 360 video game consoles since the launch last November, and losses at its entertainment and devices division shrank to $96 million from $173 million a year ago and $414 million the previous quarter.

“We’re progressively lowering the manufacturing costs of the console,” Liddell said. “So even for the ones we do sell, we are in a better shape from a loss-per-console perspective.”

He added that the number of games sold per Xbox rose in the quarter. While video game machines often sell at a loss, the games themselves are highly profitable.

Microsoft shares have risen about 25 percent since June, hitting a near-two-year high on investor optimism that the much-anticipated Windows and Office upgrades will pay off.

Microsoft is expected to launch Windows Vista and Office 2007 for corporate customers this quarter, and for retail consumers early next year. The two product lines comprise more than half of Microsoft’s revenue and almost all of its profit.

Source - CIOL