Linked by Thom Holwerda on Sun 13th Jan 2013 14:48 UTC
Windows Tom Warren: "While Intel is trying to keep the Windows tree healthy, Microsoft is hoping that the leaves don't start to drop off before its own family of Surface devices are fully ready. Redmond isn't 'priming the pump' here, it's planting seeds for the future. If Microsoft is successful then it could be the world's biggest Windows OEM in just a few years. The future is Surface." You just have to look at the difference in build quality and supplied software between OEM devices and Surface even though Surface is cheaper to realise that the age of Windows OEMs is coming to an end. The writing's on the wall, and the OEMs know it: there's no future for them in Windows.
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RE: OEMs did it to themselves
by the_trapper on Sun 13th Jan 2013 16:16 UTC in reply to "OEMs did it to themselves"
the_trapper
Member since:
2005-07-07

Will anyone feel sorry for the OEMs? Pretty much all of them are still or have been in the past guilty or making boring plastic machines pre-installed with crapware. Meanwhile they've all been building android tablets. And some like HP with webos have even threatened to completely replace Windows. And lets not forget the Chromebooks also eating into microsofts business.

Microsoft must be thinking with friends like these who need enemies!


Yeah, because Microsoft has always treated its OEMs so well.

Microsoft is hardly the victim here. Did you ever stop to wonder why these OEMs install crapware? It's because Microsoft's outrageous licensing fees for what should be a commodity are destroying their margins. These OEMs already have razor thin margins without having to add ludicrous software licensing fees on top of that.

Reply Parent Score: 6

RE[2]: OEMs did it to themselves
by Stubbs on Sun 13th Jan 2013 16:43 in reply to "RE: OEMs did it to themselves"
Stubbs Member since:
2007-03-08

Don't get me wrong, I'm not suggesting Microsoft is the victim here if anything it's the consumer who has suffered. Margins may be thin but OEMs have done this to themselves, while they've been in a race with each other to the bottom Apple has shown that there actually is a market for premium computers.

Reply Parent Score: 3

tanzam75 Member since:
2011-05-19

Microsoft is hardly the victim here. Did you ever stop to wonder why these OEMs install crapware? It's because Microsoft's outrageous licensing fees for what should be a commodity are destroying their margins. These OEMs already have razor thin margins without having to add ludicrous software licensing fees on top of that.


That's not how economics works in a competitive marketplace.

The price of Windows is irrelevant to the OEM -- so long as Microsoft charges the same price to every OEM. Because of the antitrust settlements, all the large OEMs pay the same amount for Windows, as Microsoft is prohibited from offering any discounts except for volume discounts.

If the price of Windows went to zero, then the cost of the laptop would drop by around $60, the volume price of Windows Home Premium for large OEMs. However, the OEMs do not get to keep this $60 for long, in a competitive marketplace. The price of the laptop would quickly get driven down by $60, as PCs are commoditized and largely substitutable for one another.

The OEMs would then end up making the same profit on less revenues. They'll see a slight improvement to working capital, but it will be otherwise ineffectual at lifting them from the pitiful margins they currently earn. In fact, CTO manufacturers like Dell would actually see slightly reduced margins if the OS became free. Dell is famous for holding negative inventory, and thus they would lose the float on the price of the Windows license.

This competitive dynamic is precisely the one that has already played out in the Android phone market. The OS is free -- and of course, Google shares part of the search revenues with the OEMs. Yet the Android marketplace is a bloodbath for every OEM except Samsung.

--

Incidentally, the same goes for Intel as for Microsoft. The price of the chip is irrelevant, so long as Intel does not practice favoritism among the OEMs.

One day, business-school students will study the PC OEM business like they currently study the American airline industry -- as an example of a super-competitive marketplace in which practically nobody (*) makes money. We haven't really seen major bankruptcies yet -- but we will.

(*) There are always exceptions. Lenovo, say, or Southwest Airlines.

Reply Parent Score: 6

lucas_maximus Member since:
2009-08-18

Except Linux based laptops were always more expensive than Windows OEM, because of the crapware discounts.

Reply Parent Score: 4

Lennie Member since:
2007-09-22

I doubt Microsoft charges the same to every OEM, even if they do Microsoft also gives money to OEMs in the form of PR-budget connected to the Windows Logo project.

That money is garanteed to be different per OEM.

Reply Parent Score: 4

Deviate_X Member since:
2005-07-11

If the price of Windows went to zero, then the cost of the laptop would drop by around $60, the volume price of Windows Home Premium for large OEMs. However, the OEMs do not get to keep this $60 for long, in a competitive marketplace. The price of the laptop would quickly get driven down by $60, as PCs are commoditized and largely substitutable for one another.



The irony here is that the OEMs are also at fault for this race to the bottom. They have actually relied on the fact that Windows was dominant to sell their hardware.

Everyone common man/women knows about iMac, Mac Pro, but can you ask the same about Dell or HP. These companies are positioned themselves and designed their products so that the only differentiator is price.

Reply Parent Score: 2

bassbeast Member since:
2007-11-11

You are right and I would just add that MSFT is also guilty of killing one of the more interesting form factors along with their good buddy Intel, I'm of course speaking about netbooks. The original netbook ran a Celeron and a small SSD and was very cool, I was lucky enough to get one of the 12 inch AMD netbooks and the E350 means I can play Portal and L4D and even run full Linux VMs on a machine that barely weighs 2.5 pounds and fits under my truck seat, holds 8GB of RAM and oh yeah only costs $350 USD at release. Great unit that purrs even after 3 years.

So what happened? MSFT raised the price of Windows to the OEMs to get rid of the market, Ballmer decided that Windows is "upscale" and shouldn't be sold on cheap devices so it went from $15 for XP Home to $30 for Vista Basic to $45! For Win 7 Basic and you'll notice there is no Win 8 Basic, the lowest tier is rumor has it $65 a copy to OEMs now. And of course Intel managed to get away with another frankly illegal move by killing the Nvidia chipset business and by doing so made the Atom chip completely worthless, as without ION to boost its video performance its a total dog. But of course Intel doesn't want you buying Atom, it wants you to buy Ultrabooks. Ironically thanks to their good buddy MSFT putting out WinME the second coming they have warehouses full of chips because the ultrabooks aren't selling.

So if the board at MSFT don't put down the crack pipe and fire Ballmer I could see the OEMs bailing, after Ballmer announced they were getting into the X86 hardware biz and that his goal is to sell MSFT hardware with MSFT software at MSFT stores (where have I heard this before?/munches on Apple/) they really have no choice, its get away from Windows or die.

Reply Parent Score: 2