Microsoft’s reputation is one of a moneymaker, but the fact is that four of its seven business units are in the red. To the tune of US$1.6 billion in fiscal year 2003, Microsoft bled money from its Business Solutions, Mobile and Embedded Devices, MSN, and Home and Entertainment divisions.
Microsoft Seeks its Next Cash Cow
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Eugenia Loli
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Yet the MS apologists still believe that MS conquered the PC market by virtue of its incredible business prowess.
MS got lucky folks and was able to keep people from taking its turf after the fact by abusing the position it was given (given by IBM). MS is no master of execution and bill gates is no genius business man. Gates is just abusive and limited in his ability to identify and care about the difference between right and wrong.
Well said!
>> MS got lucky folks
Yeah right..! They got lucky with Word, and Excel, and Internet Explorer, and SQL, and Exchange, and MSN and God-knows-what else. As some wise man said, “I really believe in luck, and I find the harder I work, the luckier I get”.
> Yeah right..! They got lucky with Word, and Excel, and
> Internet Explorer, and SQL, and Exchange, and MSN and
> God-knows-what else. As some wise man said, “I really
> believe in luck, and I find the harder I work, the luckier I > get”.
Most of their success in these areas is a direct result of their use of unfair business practices to maintain their stranglehold on the desktop. When you make it to the top by stealing from everyone around you, there’s nowhere to go but down. Hopefully, Microsoft’s first really bad quarter is a harbinger of it’s slow demise.
“I really believe in luck, and I find the harder I work, the luckier I get”.
That’s a paraphrase of one of Thomas Jefferson’s quotes, isn’t it? Always been one of my favorites.
I thought that MSN was one of the divisions that was losing them money.
Internet explorer became ubiquitous because it was bundled with the OS, which was a pretty good business strategy.
SQL is usually used at Windows-only shops; most of the companies I’ve worked with who don’t mandate Windows server-side use alternatives on the database front. Exchange is another story, but I know a lot of businesses are looking at alternatives like SUSE’s OpenExchange because of the licensing costs involved.
As far as Office, well, I watched it take over in the business sector and then (because of proprietary file formats) in the home sector, but at the time I preferred WordPerfect. It would be interesting to see what happened if they were forced to not use those proprietary formats so that people weren’t forced to use their products for interoperability (OpenOffice does a good job with them but it will sometimes choke on heavily formatted documents). Of course, I don’t see that happening, but it would be interesting. The Office suite is probably (up until Windows 2000) the best thing they ever wrote; for the most part it is a pretty good problem, but Outlook has always been a bit buggy. Haven’t used Office 2003 yet, so I don’t know if it has improved, but Outlook has gotten better with every version.
Personally, I am a linux user these days; I put my money where my mouth was and decided that I wouldn’t give a company that does business the way they do any more of my cash. I do support Windows machines at work and I was an Active Directory and Exchange admin at my last job. If you like Windows and don’t mind the way Bill does things, more power to you, use whatever you want – you won’t hurt my feelings 🙂
The fact of the matter is, though, that they make pretty much all of their money off of Windows and Office. That doesn’t mean they’re in trouble (dear God, just look at their revenues!), but yes they are looking for another cash cow…just like any sensible company would.
“Yeah right..! They got lucky with Word, and Excel, and Internet Explorer, and SQL, and Exchange, and MSN and God-knows-what else. As some wise man said, “I really believe in luck, and I find the harder I work, the luckier I get”.
The ONLY two cash cows of MS are MS Windows and MS Office, two products which have more than 90% of marketshare and abusive prices.
Internet Explorer is popular because it comes embedded in Windows. It won only because of this strategy.
MS SQL is not the better product nor the most popular. Oracle is better (and more popular in high applications) and MySQL is more popular in web.
MS Office cash cow will be affected seriously with each better release of OpenOffice and each foreign (non_US) government who adopts it as standard.
Windows is not a winner in server market also.
Perhaps the only reason I value SUN is their OpenOffice.org contribution to open source software. I believe OpenOffice.org in conjunction with Linux could be the soldering iron that will drill holes in Microsoft’s reservoir.
History teaches us that empires have come and gone; empires have risen and fallen. I think if Longhorn doesn’t live up to it’s hype, we can kiss another empire good bye.
Marcelo:
Except for the fact that IE started gaining a huge market share BEFORE it was ever shipped with Windows. Not to mention the fact that it was light years ahead of Netscape at the time.
It depends on how you define better, MS SQL is superior in some areas, while Oracle and DB2 take the crown in other areas, it’s all in what you look at.
Windows has been gaining market share in the server sector for a long time now.
Flatline:
MSN had its first quater of proffit just this past quarter.
Except for the fact that IE started gaining a huge market share BEFORE it was ever shipped with Windows. Not to mention the fact that it was light years ahead of Netscape at the time.
This is not true. IE did not start gaining any substansial market share until version 4.0. Version 4.0 was bundled with Windows 98 by default. Previous versions were only available by 1) buying MS Plus 2) download. Versions 1 – 3 were particularly bad too.
Keep in mind that much of the Office suite and large parts of their operating systems were assimilated/bought from other companies.
If you want to use the term “luck”, perhaps they are lucky they grew so large and abusive that they could intimidate people into giving up their products.
Microsoft turn over a great deal of cash.
They can (and do) write off the tax from R&D, so it’s worthwhile for them to invest internally in new products where there little is a chance of a market. Also they aquire (and generate) a great deal of assets and goodwill.
It’s worth looking at the Microsoft Business solutions goodwill too (another $900 million tax write off from a total of $1,197 million in 2003 (2003 Annual report 10K-18)).
Then compare that to the Home and Entertainment segment ($270 million deductable from $281 million).
Some of their decisions therefore, may only make sense over time periods of over 15 years. Don’t assume a single years loss in their smaller segments means they are going bankrupt.
The thing is that these other divisions have never been making much money. Windows and Office carry Microsoft’s entire lineup, and they use profits from these products to subsidize its losing propositions. They can afford to have most of their products lose money for many years, which their competitors in these markets cannot.
This is yet another unethical behavior by Microsoft. It is illegal to leverage your monopoly to compete unfairly in other markets. From my point of view, Microsoft’s throwing monopoly money at a market until it can just overpower their competitors is definitely a violation of this law.
$9.7 billion – Share of Microsoft’s $32 billion revenue, about the size of Oracle’s total sales.
$1 billion – Growth in the Office division last year, about the size of Adobe Systems total sales.
$9.2 billion – Office sales last year.
$18.4 billion – Sales if all 400 million users paid (half don’t). Read: MS gives away more copies of Office than they sell.
70% – Office’s operating margins.
0 – Software companies with higher margins. (and most other non-software companies as well)
Source:Forbes.com
Microsoft is the darling of the investment community because they show steady profit growth. They do this in large part by modulating their losses on ventures that make sense strategically. The profits from their monoply are simply so huge that they need to lose money on something to keep the peasants from the gates and to avoid giving too much to everyones uncle. They prefer to spend the money on R&D rather than pay taxes andtTo the extent that it puts people to work, it is a good thing.
(If and) as their stranglehold on the marketplace is loosened, they will simply cut the least promising losers and maintain a steady profit growth. This is yet another byproduct of their monoply and clear evidence of their profound understanding of the business environment in which they operate.
The first poster (Ryan) seems to think these loses are an indication of ineptitude. Ryan’s belief merely demonstrates the insidious nature of the Microsoft monoply.
People buy Microsoft because it does the job. Microsoft is not forcing anybody to buy their products. Microsoft is just doing what any business would do.
>>
Yeah right..! They got lucky with Word, and Excel, and Internet Explorer, and SQL, and Exchange, and MSN and God-knows-what else. As some wise man said, “I really believe in luck, and I find the harder I work, the luckier I get”.
<<
MS, throughout most of the 90’s, was in competition with companies that couldn’t slap their own a$$ with both hands. IBM competed against them with OS/2 and a dismal ad campaign. Borland tried to kill them with an office suite, instead of concentrating on what they do well. The road was littered with torn clothes and bloody bandages from everyone but MS. It wasn’t that MS is actually that great at what they do, it’s that everyone else, at the time when it really counted, was a lot worse than MS at it. MS rose to a position of dominance at that time, and by the time anyone else figured out how to actually compete with them, they were too far behind, or dead already.
Im sorry, I dont remeber the last time I was given theoppurnitytobuy a computer w/o windows. Right now im forced to build my own or pay their little “MS tax”
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🙁
Im sorry, I dont remeber the last time I was given theoppurnitytobuy a computer w/o windows. Right now im forced to build my own or pay their little “MS tax”
Who cares about your “pay the ms tax” rubbish. Ok, go to dell and demand that you get a $9 discount off the system because you don’t want Windows pre-installed. That is how much money you’ll save.
If you don’t like Windows, then uninstall it and install the operating system YOU want over it. There is nothing stopping you at anytime.
“Who cares about your “pay the ms tax” rubbish. Ok, go to dell and demand that you get a $9 discount off the system because you don’t want Windows pre-installed. That is how much money you’ll save.”
But isn’t that idiotic by itself ? You don’t need to by a diesel car if you want to have something that runs on petrol ! You are not forced to buy a diesel car and then have to modify it to make it run on petrol. Why should computers be any different ?
And yes the sad part is that you will only save $9 if you demand that you don’t want Windows (doesn’t work with Dell though you have to find someone else). I was on the phone with another computer manufacturer and told them that I don’t want Windows with my new machine but they insisted that I have to get it. They told me that I would only save about $15 if I opted for not choosing Windows on my machine. I told them that if that’s the case I want to by 100 copies of Windows all for $15 since according to them that is the rate it is going for. Needless to say they would not sell me not even one copy of windows for $15. If that’s not a shady way of doing business I don’t know what is. Just my $0.2…
US economic law is not that simple. When a company is a monopoly, they don’t just have an obligation to not force people to buy their products. They have additional obligations to ensure that they do not unfairly leverage their monopoly to compete unfairly in other markets.
The criteria for what is legal and what is illegal is different for monopolies and normal companies.
There’s no real problem:
MS should buy SCO & then send out letters of demand to all of the Linux users.
What have they got to lose? Goodwill?
Good answer M$ doesnt have any answer to Linux so the only way that M$ will survive is thru bully and monopoly.
In the last 10 years not one single innovation came from M$. If you think they do please list it out.
linux. all you linux-users should just switch back. your wasting your time
This is the United States of America, you have the choice to buy the software if you don’t then quit worrying about it.
MS can charge whatever price they see fit, in America you have the right to operate a business. It just happens that the owner of MS is a smart business man and he knows how to make money. People are always jealous or have envy of someone successful.
MS has made the PC what it is today, Millions of users and having 95% of the market in Desktop operating systems can’t be wrong. Plus, if you don’t like windows use something else and quit complaining about MS making money. They are in business to make money…. Nothing wrong with that.
I totally agree with you. Even until now those company still doesn’t change much. Look at Word Perfect or Lotus, what are they doing? They still want to compete on MS playground rather than look at other option such as produce decent version for other platform such as OSX or even OSS. Yeaah, they make money on Windows but for how long before MS totally kill them?
“In the last 10 years not one single innovation came from M$. If you think they do please list it out.”
I wouldn’t call Active Directory a purely MS innovation, because other variations of this technology have existed for many years. (xerox, novell, and others)
What I am certain of…. AD has allowed secretaries to take over much of the day to day configuration of small business networks, saving small to medium sized companies a ton of dollars annually.
I wouldn’t call Plug and Play a purely MS technology, but MS made it really easy for less than technical people to install devices on their systems without paying a tech to do it for them. It’s all about ease of use.
It’s not exactly MS being an innovator of anything, it’s more about what they have done with existing technology.
MS just did a far better job of implementing technology than nearly everyone else, and profited from it.
Granted, MS is far from perfect, their means are often in question, and on and on. However, they didn’t gain the desktop market share they currently enjoy simply by accident.
Many techies find fault with nearly everything MS says or does, many others simply hate them with a passion. Everyone technical has an opinion on this one…
The run of the mill USER couldn’t less give a damn what OS or program is loaded on their system. Provided of course it looks like Windows and has the same interface as Word.
Correct, IE didn’t start really becoming popular until 4.0 (I think they had like 22% market share when IE4 came out), but you have to remember, IE4 was out for quite some time before Win98 came out, and it garnered a LOT of market share BEFORE the release of Win98.
Actually, companies do not have the freedom to make money however they want. The US economy is actually a carefully managed system with many rules and regulations. Monopolies and trusts are an enemy of the free market, and are carefully regulated because of that.
If you want an economy where companies have free reign to do whatever they want, however they want, I suggest you move out of the USA. Actually, there’d be nowhere really to move to, because most countries have realized that laissez-faire capitalism is actually damaging to a free market in the long run.
I know I’m responding to flame bait, but I’ll go along with it.
“Microsoft, as a monopoly, BY DEFINITION, is forcing people to buy their products.”
As long as they aren’t forcing me, I don’t mind. I bought my laptop last year with Turbo Linux (because it was free). My last two machines I bought pretty bare, because they were cheaper. Came with no OS. I only chose Windows in the long run because it was faster, easier, and better supported my hardware. Linux is getting there… but I’m too lazy to learn the system.
“Microsoft steals IP from other companies to prop up their monopoly.”
That’s business. But not my business. If it’s illegal, then it’s their problem to worry about, not their users.
“Microsoft plays a rigged game and everyone knows it.”
You might be surprised by how many people actually don’t. A lot of typical home users are too busy chatting and playing games.
“The world is tired of Microsoft. It is time for something new.”
Isn’t their Operating System the most used world-wide? maybe a few people are tired of them… but the whole world? Nah…
“Microsoft will be out of business in 10 years.”
I doubt it.
The ONLY two cash cows of MS are MS Windows and MS Office, two products which have more than 90% of marketshare and abusive prices.
MS Office, overpriced? Maybe. But MS Windows? There are not many OSes that comes with so many features for its price point.
Im sorry, I dont remeber the last time I was given theoppurnitytobuy a computer w/o windows. Right now im forced to build my own or pay their little “MS tax”
Nobody is forcing you to buy a PC from an OEM. If you do really want to buy from a major one, that’s your problem. At worst, you could buy a Mac. They offer computers without MS Windows… (Note: I’m not a Mac user, I’m just mentioning that to invalidate the claim that you absolutely have to pay the “MS tax” to get a computer.)
if Microsoft will be out of business in 10 years yadi yadi yadi…
why is it then, that IBM is the one who increasingly now try to cut jobs in US (Geee, why would I care, I’m from Europe)…
How many products have they ever produced from scratch i.e. which they can clearly call of their making. (not bought in)
How many of those have competed in the marketplace without the monopoly power forcing the market.
Okay, so there are a lot of people making statements about a “ms tax” etc….
Just exactly how much is your OEM charging you for that copy of Windows on that 299.00 PC?
It’s gotta be 298.99 by some of your estimates, after all Dell and the rest of the pack are giving the hardware away for absolutely nothing….
That’s not right.
Forget the MAC, if you have never used one, which I have not, unfortunately, their prices always kept me away, If you want to buy a PC, I have only once come across a shop selling computers without MS installed. (So I bought there in parts, and built it myself). Look in PC magazines ads too. All XP pre-installed.
That is unfair in any language. I wouldn’t say it is a tax though. However it is lack of choice.
So to all the shops who have the courage to give a choice, I congratulate you. Its a tough choice to swim against the waves, but well worth it.
With such a high revenue, of course there comes a moment it becomes incredibly hard to keep growing without any fallbacks.
About being lucky, I remember a Dilbert joke:
Dilbert (to Ratbert): Hey, we are now getting paid extra money, depending on how many bugs we fix! Ratbert, quick, jump into the keyboard and walk on it randomly…
Ratbert: How am I doing?
Dilbert: Not so good. You just authored a new web browser.
“Look Rayiner Hashem, whatever your name is you are not a US citizen or you need to be sent back to what country you came from. The United States is a free country, there are not price controls on Operating systems or Office suites ect.”
chill out dude. Rayiner is correct. The US is not a free market. You don’t have the right to do anything you want and MS and most other companies benefit from paying off politicians to pass laws in their favor. The US economy is quite regulated generally to the benefits of corporations. those corporations are effectively protected. Its not a free market.
“The United States, is the ONLY Nation to survive under the Constitution for over 200+ years… All others have revolts, anarchy and so on.”
do you have any concept of history? Civil war? Do you know the nation was on the brink of another one during the great depression. Are you aware of the fear that the government would be toppled in the 60’s. Did you know that kennedy’s murder was effectively a coup?
“So it sounds like to me Rayiner Hashem, you need to leave the United States if you dislike it so much. YOU are a traitor, Communist, and a real idiot…”
it sounds to me like i (an american citizen) want rayiner in the country. True patriots ask questions even when its not popular. they don’t put on blinders and buy the propaganda.