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Where Microsoft's Profits Come From

CmdrTaco posted more than 4 years ago | from the just-in-case-you-were-wondering dept.

Microsoft 295

derrida writes "Microsoft is the largest, most profitable software company in the world. In case you had any doubts about where Microsoft's profit comes from, there's nothing better than a graph to make all those numbers clear. As you may have guessed, the desktop division is quite profitable, while the online division is a money pit."

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Hmm... (-1, Offtopic)

Anonymous Coward | more than 4 years ago | (#31134486)

Frosty piss!

Boogers!

Interesting graph! (4, Insightful)

erroneus (253617) | more than 4 years ago | (#31134494)

What I find most interesting is the way all changes are perfectly synchronized with the exception of entertainment related stuff. This is clear indication of the power of vendor lock-in and tying unrelated products together.

What I would find interesting is to know what events occurred during the valleys and rapid climb moments indicated in the graph. Specifically, what happened in Dec '06 and Sep '09?

Re:Interesting graph! (2, Insightful)

Anonymous Coward | more than 4 years ago | (#31134526)

What I would find interesting is to know what events occurred during the valleys and rapid climb moments indicated in the graph. Specifically, what happened in Dec '06 and Sep '09?

Vista.

Re:Interesting graph! (0, Flamebait)

sopssa (1498795) | more than 4 years ago | (#31134650)

All the top three make sense anyway. New Windows version (with new/changed API's and stuff like UAC) require a new Office version, which leads to more sales. Also, a lot of times both Windows+Office licenses are sold to companies together as they need them anyway. New Windows Server OS versions and tools are also released parallel to customer versions of Windows, so their sale will obviously increase as well.

The drops are probably because a new OS version was coming up and people didn't want to buy the old one.

Re:Interesting graph! (-1, Flamebait)

Anonymous Coward | more than 4 years ago | (#31134804)

The drops are probably because a new OS version was coming up and people didn't want to buy the old one.

Yes because the economy was super duper, especially from 2007 December onwards. And of course, lack of sales had nothing to do with companies pulling back on expenses ...

Another stellar spam post by sopssa. Keep it up TripMasterFucktard!

Re:Interesting graph! (-1, Flamebait)

Anonymous Coward | more than 4 years ago | (#31135046)

Why are you following him around. Are you his personal cum bucket or something?

Re:Interesting graph! (2, Insightful)

nxtw (866177) | more than 4 years ago | (#31134830)

New Windows version (with new/changed API's and stuff like UAC) require a new Office version, which leads to more sales.

Unlikely - Office 2003 works on Windows 7 and Office 2010 will work on Windows XP.

LOL (-1, Flamebait)

Anonymous Coward | more than 4 years ago | (#31135064)

If I wear a Steve Ballmer mask, will you suck my cock?

Re:Interesting graph! (0)

Anonymous Coward | more than 4 years ago | (#31135222)

Who the fuck modded this flamebait?

Re:Interesting graph! (1)

koreaman (835838) | more than 4 years ago | (#31134548)

Microsoft released its quarterly financial reports?

Re:Interesting graph! (0)

Anonymous Coward | more than 4 years ago | (#31134638)

Microsoft released its quarterly financial reports?

Yep, every quarter.

Re:Interesting graph! (0)

Anonymous Coward | more than 4 years ago | (#31134796)

Personally, I find it interesting you think quarterly reports are released every three year on random months. You might want to wikipedia that.

Re:Interesting graph! (4, Insightful)

timeOday (582209) | more than 4 years ago | (#31134558)

What I find most interesting is the way all changes are perfectly synchronized with the exception of entertainment related stuff.

Are you sure that isn't just how the graph looks because it is stacking the data series on each other?

What surprises me is the massive boost in OS profits in Dec 09. Could that really be Windows 7, and if so, how? It costs about the same as XP/Vista, and it's not as if people are buying Windows 7 off store shelves to upgrade older computers (are they?)

Re:Interesting graph! (1)

softwaredeveloper (654278) | more than 4 years ago | (#31134588)

My guesses - - Layoff of the developers now that 7 is rtm - People who were waiting for release of 7 weren't spending any OS related money for months prior to release, so you have a sudden 'relative' influx of profits

Re:Interesting graph! (0)

Anonymous Coward | more than 4 years ago | (#31134630)

What I find most interesting is the way all changes are perfectly synchronized with the exception of entertainment related stuff.

Are you sure that isn't just how the graph looks because it is stacking the data series on each other?

The stacking does not account for the synchronous nature of the top money makers. The different colors are almost perfectly parallel, so each of the top data sets moves proportionately with the others.

Re:Interesting graph! (2, Informative)

xZgf6xHx2uhoAj9D (1160707) | more than 4 years ago | (#31134706)

If the different colours are perfectly parallel, then there is zero movement in the upper layers and they only look parallel due to how the data is presented (stacked). In order for them to be "synchronized" you'd have to see the layers diverging from one another, not parallel to one another. You can a little bit of this, but not much. For instance, between December 2006 and March 2007, Office sales diverge a wee bit from the layers underneath. The Servers and Tools seems to stay completely flat, maybe even shrinking a bit.

Really it's just Windows sales going up and down and the two layers on top of them not doing very much.

Re:Interesting graph! (1, Informative)

Anonymous Coward | more than 4 years ago | (#31134652)

Some actually are buying retail copies - but not all that many. Most of it is people buying computers near the holidays. This time MS actually had the OS ready for those people buying near Christmas (they had missed that date with Vista and of course Vista's reputation kept many away too). Lots of people had put off purchasing a new box until it was going to come with Windows 7.

Re:Interesting graph! (0)

Anonymous Coward | more than 4 years ago | (#31134966)

Actually the graph is neither a direct data series nor a stacked data series. You can tell this because the plot for "Entertainments and Devices" at a point between Mar '08 and Jun '08 shows area both below Online Services and above the x-axis. This is impossible for a direct data series. This is also impossible for a stacked data series.

Re:Interesting graph! (1)

thetoadwarrior (1268702) | more than 4 years ago | (#31135086)

They're only stacked because of the profits they make. Office just happens to make the most profit and they will more or less match up because companies won't be just buying Windows and then just buying Office. They'll get a package deal from MS that will include everything.

Re:Interesting graph! (5, Insightful)

Amanieu (1699220) | more than 4 years ago | (#31134574)

I believe that the two drops and spikes correspond to a new version of Windows being release. Prior to release, people will stop buying the old version, which would be seen as a drop in profits. After the release, a lot of people will upgrade, which accounts for the spike in profits. The second spike (2009) is bigger than the first (2006) because Windows Vista wasn't as successful as Windows 7.

Re:Interesting graph! (1)

Sponge Bath (413667) | more than 4 years ago | (#31134666)

This could be the result of accounting tricks to make revenue from the base products look stable. Then shareholders can be soothed by the consistent numbers.

Re:Interesting graph! (4, Informative)

rjch (544288) | more than 4 years ago | (#31134690)

What I would find interesting is to know what events occurred during the valleys and rapid climb moments indicated in the graph. Specifically, what happened in Dec '06 and Sep '09?

December 2006 was the release of Vista. (Well, November 30th, but close enough) September 2009 was the release of Windows 7.

Re:Interesting graph! (5, Insightful)

fullfactorial (1338749) | more than 4 years ago | (#31134726)

What I find most interesting is the way all changes are perfectly synchronized with the exception of entertainment related stuff. This is clear indication of the power of vendor lock-in and tying unrelated products together.

No. It's a clear indication that TFA used a Stacked Line Chart [microsoft.com] . If you were to move Office and Server to the bottom of the stack, you would see that they both account for relatively small sales bumps (~1 billion), with the real movement coming from the release of Windows Vista (Mar '07 bump) and Windows 7 (Dec '09 bump).

Normally you avoid data distortions like this by putting the least-variable data at the bottom of a stacked chart. I think "Chart of the Day" needs a better-trained Excel monkey.

Re:Interesting graph! (3, Informative)

zippthorne (748122) | more than 4 years ago | (#31134840)

Normally you avoid data distortions like this by using a better kind of chart.

The problem is that they're trying to visualize two different things in one chart (relative and total values), and the compromise you make doing that in a stacked chart pretty much sacrifices everything except the sum of the values.

Also, area-shaded line graphs make absolutely no sense if you've only got a few data points.

Re:Interesting graph! (1, Insightful)

erroneus (253617) | more than 4 years ago | (#31134956)

Point taken.

If you hadn't linked me to a Microsoft page that made my Firefox go crazy after I enabled javascript, I would have responded sooner. (I'm not saying that Microsoft's page is hostile to my installation of Firefox exactly, but I have not rebooted my computer in a few weeks despite having installed updates that could easily be trampling all over one another at the moment... however, all other web page browsing seems normal until I enable javascript on that page. Seems odd. I love the "no script" addon... lets me control who affects/infects me better.)

After staring at the chart, I see what you mean. I did, in fact, misinterpret the graph. I think a stacked graph like that is appropriate for that display of information at all. While placing the least varying data at the bottom would serve to reduce the possibility of misinterpretation, it would not eliminate it. The page linked to actually shows a better and much more appropriate implementation of stacked data of this sort... a stacked bar chart.

My original statement was generally true, but using that chart to evidence the asserting was incorrect.

Re:Interesting graph! (0)

Anonymous Coward | more than 4 years ago | (#31134822)

What I find most interesting is the way all changes are perfectly synchronized with the exception of entertainment related stuff. This is clear indication of the power of vendor lock-in and tying unrelated products together.

It's a result of a stacked chart. What I find interesting is your immediate response as a "clear indication" of vendor-lockin when in fact it's nothing of the sort.

Correlation/Causation (0)

Weaselmancer (533834) | more than 4 years ago | (#31134826)

What I find most interesting is the way all changes are perfectly synchronized with the exception of entertainment related stuff. This is clear indication of the power of vendor lock-in and tying unrelated products together.

That's one possibility. Another would be the economy itself. Maybe when things are good people buy more software so both go up at the same time.

Re:Interesting graph! (2, Funny)

Whatanut (203397) | more than 4 years ago | (#31134916)

You + stacked graph reading = fail. Stacked graphs are always in sync. You have to read each layer independently to see what's going on. Just because layer 1 increased, layer 2 will go up. That doesn't mean layer 2 increased.

Re:Interesting graph! (2, Insightful)

TheRaven64 (641858) | more than 4 years ago | (#31135220)

I think it's actually a pretty big fail on the part of whoever drew the chart. At first glance, it appears that the Office revenue has gone down a lot in the past few months, but in fact it's just that Windows revenue has made the line much steeper. There are much better ways of presenting this kind of data.

The chart is mis-labeled (0, Troll)

tomhudson (43916) | more than 4 years ago | (#31134534)

It should be labeled "Where stupid people waste their money."

Re:The chart is mis-labeled (0, Insightful)

Anonymous Coward | more than 4 years ago | (#31134586)

Indeed, office 2000 and office 2007 are esentially the same product. And Windows 7 is worse than XP.Microsoft has been living all this decade by selling stuff they already had and didn't significantly improve, MS is the biggest scammer in the world.

Re:The chart is mis-labeled (3, Informative)

biryokumaru (822262) | more than 4 years ago | (#31134602)

Isn't 2007 the one with the ribbon that no one can use? Doesn't that make it a new product, the fact that no one knows how to use it anymore?

Re:The chart is mis-labeled (4, Funny)

Anonymous Coward | more than 4 years ago | (#31134936)

Isn't 2007 the one with the ribbon that no one can use?

That was my idea.

Re:The chart is mis-labeled (3, Interesting)

DAldredge (2353) | more than 4 years ago | (#31134698)

How am I wasting money by paying for products like Win7 and Office?

Re:The chart is mis-labeled (5, Insightful)

TheRaven64 (641858) | more than 4 years ago | (#31134782)

I don't know, what can you do with Win7 and Office 2010 that you couldn't do with WinXP and Office 2000? What new improvements in productivity do you gain from them? How did they lower your other costs (e.g. hardware)?

Re:The chart is mis-labeled (0)

zippthorne (748122) | more than 4 years ago | (#31134928)

Can you still get winXP and office 2k? Maybe he had to buy a new computer and didn't want a legacy OS on it. Computers don't last forever you know.

For home use, maybe he just got tired of the aesthetics. Or do you live in a bare apartment with minimalist furniture and fluorescent tube shop lighting?

Re:The chart is mis-labeled (2, Informative)

DesScorp (410532) | more than 4 years ago | (#31135144)

Can you still get winXP and office 2k? Maybe he had to buy a new computer and didn't want a legacy OS on it. Computers don't last forever you know.

You can still get brand new Windows 95 discs on Ebay. XP and 2K are no problem to acquire. And I'm of the school that says unless there's a real reason why you should upgrade, you shouldn't be forced to. Lots of people use older operating systems because it suits their needs. I'd say for 90 percent of businesses, Windows 2000 would quite ably suit their needs. The only reason many businesses upgrade is because "Microsoft tells us it's time to upgrade".

Re:The chart is mis-labeled (1)

Rockoon (1252108) | more than 4 years ago | (#31135246)

If you are buying a brand new copy of the OS... then why would you buy an old version that is out of support, or about to be out of support?

The main reason that people are forced to buy new versions at all is because they are under an OEM license and can not (or at least should not) use their old copy.

For the record I think the OEM license is the way to go for most people, even if they build their systems themselves. You save about 50% of the cost with the OEM license and normally the system lasts long enough to justify having to purchase a new license with a new system. When saving 50%, you can get two OEM licenses for the same price as one that migrates.

Re:The chart is mis-labeled (2, Interesting)

tepples (727027) | more than 4 years ago | (#31135084)

I don't know, what can you do with Win7 and Office 2010 that you couldn't do with WinXP and Office 2000?

Buy a new PC with it preinstalled.

What new improvements in productivity do you gain from them?

The same productivity that comes from the rest of the new computer with which the Windows operating system is bundled: a faster CPU, more RAM, a larger hard disk, etc.

Re:The chart is mis-labeled (5, Insightful)

DesScorp (410532) | more than 4 years ago | (#31135124)

I don't know, what can you do with Win7 and Office 2010 that you couldn't do with WinXP and Office 2000? What new improvements in productivity do you gain from them? How did they lower your other costs (e.g. hardware)?

Well, new versions of Office simply exist to force you into their new file formats. Office 97, simply put, does everything anyone could want, and does it well. The only real selling point for the latest iteration is the collaboration technology in it, and even then, that's only good for you if you're using it in a business or groups. There's really no practical justification for a home user to upgrade Office.

Windows 7 though, that's a bit different. It appears that MS has really given us a reason to move on from XP, with better graphics support and better security, without the bugs of nags of Vista. Windows 7 is really what Vista should have been. And it would be more compelling if all versions of 7 were 64 bit native, as CPU's have been 64 bit for quite some time now. The 64 bit part would be the real selling point here, as it would allow all versions to move past that 4 GB memory limit, hardware permitting. For a lot of people, the only reason they really had to move to XP from 98SE was the file system limits on FAT32. While 98 was more stable than 95, the reason I upgraded was the 2 GB FAT limit that was smashed with FAT32. Microsoft too often forgets that we need practical reasons to upgrade, not just shiny eye-candy. And real practical reasons, not artificially forced situations like their new Office file formats. The only reason they did that was to force businesses away from 97 and 2K.

Ok, let's see (5, Insightful)

JamesP (688957) | more than 4 years ago | (#31134546)

We look at the graph: MS is losing like 500Million per year on the Online Division

Then we look at the other graph and sees that Windows and Office has a 2Billion a year profit, EACH

And then we have to read crap like this: "We wonder when Microsoft will finally decide to do what it should have done years ago: Save its money and flush its entire online division down the drain."

No hon, SteveB is stupid, but not as stupid as you. It's called 'strategy', look it up. If it's working or not it's a whole different matter.

Re:Ok, let's see (0, Troll)

sopssa (1498795) | more than 4 years ago | (#31134600)

I've noticed the same thing too. Lot of times people say MS doesn't innovate or think long-term strategies. Losing $500 Million a year for the online division kind of shows that they do, and they're expanding their business. Yeah, it's a lot to lose every year - but theres also the possibility of high returns in future. That's how business works.

Re:Ok, let's see (4, Insightful)

erroneus (253617) | more than 4 years ago | (#31134744)

They are not "expanding their business." They are keeping potential competitors at bay.

Do you recall what MSIE did to Netscape who, at one time, threatened to make their own OS?

There is a reason they are willing to lose lots of money in online activities. Their willingness to lose money will mean that any emerging competitor will also have to be willing to lose money. Is Google a competitor? Is Sony with its PS3 or Nintendo with its Wii a competitor? You betcha! Even though they are not "desktop" competitors now, they are changing the market in favor of appliances -- network enabled appliances -- the kind of computing that has been foretold by many for the past decade. The OS may become irrelevant so long as file format and protocol standards are non-proprietary.

You are right in that Microsoft has a larger vision -- it sees its own demise and is actively working to keep anything new from rising up to render them irrelevant.

Re:Ok, let's see (1)

TheSunborn (68004) | more than 4 years ago | (#31134816)

No, its loosing 500 Million per quoter, so it's 2 Billion per year.

But the thing I don't understand is: Why does Microsoft think that search is such an important thing, and how do they plan to even gain return on their investment.

I mean even if Microsoft manage to make a success full search engine and get 25% of the market, where does this help with the rest of their products to create a strategy?

Windows, Offices and their other tools does in a way give value to each other, because they allow Microsoft to offer a turnkey solution, but where does internet search fit?

Re:Ok, let's see (0)

Anonymous Coward | more than 4 years ago | (#31134882)

Loosing 500 million what? Bowels?

eewwwwww

Re:Ok, let's see (2, Insightful)

beringreenbear (949867) | more than 4 years ago | (#31134996)

Why does Microsoft think that search is such an important thing

This goes into philosophy of how a business profits from the Internet. There are basically two ways: creating content for people to buy, or telling people how to get to content and selling the re-direction as a service be it to advertisers or any other buyer. Theoretically, someone could charge directly for Search itself.

Google built the most successful business model of telling people how to find stuff. And that is why Microsoft thinks that Search is so important. Microsoft makes money on selling people their content. That business is old-growth and stable. Which, in business, means that it is subject to atrophy and decay. To quote Ray Kroc, the man who understood business as well as anyone (He bought McDonald's from the McDonald brothers and grew it into the behemoth it is today), "When you're green you're growing. When you're not, you're not."

Microsoft has to keep trying to find ways to grow their business. Owning a piece of the search infrastructure, even if it's not being used but is available, is part of their growth strategy. Microsoft doesn't have to dominate. They just have to offer a compelling alternative to Google. Whether they do or not is beyond the scope of this comment.

Re:Ok, let's see (2, Interesting)

Jeff DeMaagd (2015) | more than 4 years ago | (#31135008)

I think it's a question of how long they expect to spend money on a strategy that hasn't succeeded in a long time. Office is an old product, Windows is an old product. They haven't done a lot since then that makes money in the same way.

Right now, it looks like Microsoft's strategy is to throw whole pots of spaghetti to the wall in the hopes that a couple strands stick, with a questionable profitability when they do stick, because the rest of the world may well have moved on to something else by the time their seed capital produces fruit.

Preparing for the Future or Buying Their Own Hype? (4, Insightful)

Alaren (682568) | more than 4 years ago | (#31134560)

Just looking at that graph makes me wonder what Microsoft thinks it is doing. Over the total lifetime of the division, what is the net profit of the "Entertainment and Devices" department? How much has Online cost, total? And what has it positioned them to do in the long run?

For years, the buzz has been building on "the cloud." For two generations of gaming consoles, it has been Sony and Microsoft's strategy both to infiltrate your living room so as to better profit from entertainment services.

But Office hasn't changed meaningfully in 6-12 years--sure there are new features that some folks like, but when I switched from WordPerfect 5.1 to Office 97 (?) that was the last time I noticed a significant change in feature set and usability. And the Windows OS has had a lot of changes under the hood, but XP to Windows 7 is much the same progression as Office 97 to Office 2007--security and cosmetics but no real innovation.

And yet, a decade without innovation seems to have cost Microsoft nothing in terms of their core markets, and their experimental markets seem to be flat. Almost as if they are trying to push the market in a direction the market knows better than to follow.

In other words, online and "cloud" services as well as the gradual move to digital delivery on consoles are both areas where Microsoft is seeking to erode ownership in favor of a rental model, while Desktop Services is still a physical product you buy (in spite of the net-based tentacles they've been extending of late). I was under the impression that people were falling for it hook, line, and sinker.

This graph is pleasantly surprising.

Re:Preparing for the Future or Buying Their Own Hy (2, Interesting)

grumling (94709) | more than 4 years ago | (#31134802)

Are you kidding? Office 2007 was such a radical change in UI that it took me about 3X longer to put together a simple document over the prior version. And just to keep everyone who's ever used the product on an even level with the intern who's been there 6 months, there's no "classic mode" button!

I understand product managers get tired of just fixing bugs, but there's a reason we don't change keyboards and paper sizes every 20 years. Imagine buying a pen or pencil that now required you to hold it parallel to the paper instead of perpendicular. That's basically what MS did in Office 2007.

Re:Preparing for the Future or Buying Their Own Hy (1)

nine-times (778537) | more than 4 years ago | (#31135174)

When Alaren said it hadn't "changed meaningfully", I don't think he meant that it hadn't changed at all. It's been standard operating procedure with Microsoft to reskin Windows and Office with each release, shuffle around all of the buttons and controls, etc. It's always the case that some people like the changes and some people don't. Some people really like the Office 2007 UI.

I think the idea was that they haven't significantly added much to Office's functionality or drastically changed the way we work on Office files. To be fair, that's a tall order. It's hard to make drastic changes to something that works well and that people are relying on. On the other hand, they had billions of dollars and 12 years to work on it.

It does seem like maybe they're starting to make some real efforts now, which seems like a good change. The fact that Exchange 2010 has webmail support for browsers other than IE; it seems like a good sign.

Changes between versions of Office (2, Interesting)

wwphx (225607) | more than 4 years ago | (#31134914)

I noticed one difference between Access XP and Access 2003. They apparently added data dictionary triggers, so if you changed a field name or table name in a database, it automatically updated views and forms and reports based on that table. I thought that was pretty cool.

Re:Changes between versions of Office (1)

wwphx (225607) | more than 4 years ago | (#31134934)

Just remembered another one. They finally got rid of that idiotic restriction of 65,000 rows in an Excel spreadsheet, I think it went away with the Vista version of Office.

Re:Preparing for the Future or Buying Their Own Hy (5, Interesting)

devent (1627873) | more than 4 years ago | (#31134952)

And yet, a decade without innovation seems to have cost Microsoft nothing in terms of their core markets, and their experimental markets seem to be flat. Almost as if they are trying to push the market in a direction the market knows better than to follow.

What a surprise. If you want to sell an Office or Operation System the first thing your customers will ask you, how good does it support Microsoft Office file format or how good will my Windows only applications running.

It's good to have an almost monopoly, you just need to polish your old applications, make the binary formats slightly incompatible, so if some important person buys the new one, everyone else must upgrade, too.

I mean, what choice do customers have? It's either Windows 7 Starter or Windows 7 Home Basic or an Mac in the Apple Store.

Every school in the western world is teaching only Windows and Office. Microsoft is not a company, it's an institution. Every Computer vendor in this world have to support Windows and all the big ones are promoting Windows with everything they have. Just try to get a new Computer, everyone will have a "Xxx recommends Windows 7" and if Microsoft will have a new Windows 8, every big vendor will put a "Xxx recommends Windows 8", regardless of any quality.

For MS and the vendors it's a win/win situation. Microsoft have ads and it sells Windows, as well as other products that are build on top of Windows. The vendors get the Windows copy for free (or almost for free).

Just try and implement and sell a new system or office suite. The entry line to this market is like enter in the tourist space market or to colonize a new planet. But a system or an office suite are very simple applications. You need some know-how, but it's not rocket science.

Google (2, Insightful)

Anonymous Coward | more than 4 years ago | (#31134594)

And Google's cash cow is search advertising and loses money hand over fist on YouTube ($753m last year).

Weird Co-incidence (1, Interesting)

LordThyGod (1465887) | more than 4 years ago | (#31134616)

But where they do the worst, is where they have real competition, and where they do the best is where they have a sanctioned monoply.

Re:Weird Co-incidence (1)

PenguinGuy (307634) | more than 4 years ago | (#31134674)

That's strange isn't it. I have always been told that Microsoft can step up and do good against competition. And yet according to the graph, they just get their asses handed to them..

Hmmm..

Re:Weird Co-incidence (0, Troll)

jschen (1249578) | more than 4 years ago | (#31134764)

How is this a coincidence? They are so successful at one area that it resulted in a sanctioned monopoly. If they weren't so successful in their core business, they wouldn't be a sanctioned monopoly in the first place.

Re:Weird Co-incidence (3, Interesting)

LordThyGod (1465887) | more than 4 years ago | (#31134878)

True. Successful in much the same way Al Capone was. If you can't out compete them legitimately, you do things like "cut off their oxygen supply". Or deliberately alter your OS code so competitor's products won't run on it. These people are unusually successfully in the low-blow business practices that got them to where they are, and now we pay the price (the royal "we") for overpriced, bloated products like MS Office, that effectively have no competition in some markets, and never will. And not because MS is smarter or codes better either. Only because MS and their fellow travellers do not want competition in those markets and get away with it, because they have a monopoly in the OS market. And because these are of course quite profitable (due to absence of competition).

Re:Weird Co-incidence (2, Insightful)

TheRaven64 (641858) | more than 4 years ago | (#31135232)

Sounds more like a tautology to me. In markets where they have competed so successfully that there is no surviving competition, they are successful. In markets where they have not and there is still lots of competition, they are not. Or, in the even shorter form: Microsoft is only successful in markets where Microsoft is successful. What a strange coincidence!

Monkeyboy needs to go (3, Insightful)

zerofoo (262795) | more than 4 years ago | (#31134620)

Microsoft is the same company they were 20 years ago. Windows, Office, and Server software are how they make money.

Everything else under Balmer's tenure has been a (financial) failure.

Now, Balmer wants to spend the war chest to win the "search" war. I've just got one question for Steve:

Hey Steve, how much money did you make on the browser war?

This idiot wants to kill Google by spending tons of money on search, yet he has not explained how this will make Microsoft a single dime.

For Microsoft to grow and prosper in other areas, Steve Balmer needs to go.

-ted

Re:Monkeyboy needs to go (0)

Anonymous Coward | more than 4 years ago | (#31134750)

This idiot wants to kill Google by spending tons of money on search, yet he has not explained how this will make Microsoft a single dime.

Well if they could get the 800 pound gorilla out of the room they might find a way to get a bigger share of bananas.

Re:Monkeyboy needs to go (4, Interesting)

TheRaven64 (641858) | more than 4 years ago | (#31134838)

Not really. There are some interesting approaches to peer-to-peer search that don't really become feasible until consumer Internet connections are a bit faster than they currently are. I wouldn't be surprised if this is how the majority are searching in 10-20 years time. Meanwhile, Google will have branched out and will be less dependent on their search revenue. Microsoft might end up spending billions to buy their way into a market that doesn't exist anymore, just like they did with browsers.

Their strategy in the browser war was to make sure that no one could make money selling a browser. The unfortunate side effect was that this meant that Microsoft couldn't make money selling a browser either, but still needed to ship one to remain competitive. If they'd sold IE, rather than giving it away, and managed to keep 40% or so of the browser market, I wonder what their financials would look like now. Did IE really lock that many people into Windows? ActiveX was only really used in the wild for Intranet deployments, and in that case IE is used more as a distributed application client than a web browser, so the same lock-in could have been achieved by bundling an unlimited client license to IE with the BackOffice or NT Server.

Re:Monkeyboy needs to go (0)

Anonymous Coward | more than 4 years ago | (#31134876)

Hey Steve, how much money did you make on the browser war?

From the graph I'd say he's making around $10B per year. Winning the browser war means 90% of the world is locked into using Internet Explorer, which means they're also locked into Windows, which means they'll also buy Office. It also means the sysadmins at most companies support Windows machines, so they may as well support Windows servers and databases too.

The loss Microsoft takes in the other divisions is trivial compared to the profits they get from a locked in customer base. Balmer knows that, and has protected that base very, very well.

Re:Monkeyboy needs to go (3, Insightful)

TheRaven64 (641858) | more than 4 years ago | (#31135254)

That's a pretty big leap. How many people are really locked in to IE? I can't remember the last time I came across a site that didn't work in Safari. Back when I was on Windows, I was using Mozilla and then Opera from around 2000, and I don't remember seeing any sites that I couldn't open in one or other of them even a decade ago.

Corporations are locked into IE as a client for their Intranet platform, but MS didn't need to win the browser war for that to happen. They just needed to make people write IE-only Intranet apps, something that was pretty easy given that most of the apps of that era were ActiveX ports of Windows-only apps.

I doubt the Windows market share figures would be very different if IE had stayed at under 50% market share.

Re:Monkeyboy needs to go (2, Insightful)

Opportunist (166417) | more than 4 years ago | (#31134962)

Look at the big picture and realize that it isn't so much a direct revenue goal they have for things like browsers or search engines, as it is to ensure their cash cow stays a monopoly.

Netscape, as it was pointed out a few posts ago, planned to make its own OS. Google now actually did just that. Browsers and even more search engines are key to influencing people's opinions. You can easily, if you control a search engine, boost your opinions and cripple your competitors. Is is, in fact, for many people their window to the web. It would be trivial for Google to push a sizable portion of internet users towards their OS and hush up about Windows if they chose so, whenever people look for a "good" OS for their computer. If they make it similar enough to Windows that people don't notice the difference, they won't complain.

Unless of course there was an alternative for Google as a search engine that you could instead turn to should they provide bogus, biased and outright forged search results to push their own agenda.

Competition is good. Even if MS is for a change not the one that tries to hold a monopoly, basically Bing is what forces Google to be "not evil".

Re:Monkeyboy needs to go (1)

Smidge207 (1278042) | more than 4 years ago | (#31134968)

-ted

Ted Turner? Is dat you?

This is how monopolies die (1)

Colin Smith (2679) | more than 4 years ago | (#31135080)

One year they have vast amounts of money, think they own the world. 10 years later, their cash is being spent on a dozen failures which they can't own up to and then, suddenly someone makes their core monopoly irrelevant.

It takes years, possibly decades for them to stop moving but it happens.

 

Time to fire some exectives (2, Interesting)

Vicegrip (82853) | more than 4 years ago | (#31134632)

After all these years... it's still Windows and Office. After all these years and new products. It's time to fire some executives. Microsoft apparently can't make money at anything new it does. Unlike Apple.

Class action lawsuit ? (2, Funny)

C0vardeAn0nim0 (232451) | more than 4 years ago | (#31134636)

IANAL and IANAAC (american citizen), so i'm asking this to whoever is any...

can't shareholder sue microsoft's chief officers/board of directors for lost profits ?

I mean, 2 bil a year is money they could be paying as dividends, right ?

can someone clarify this to me ? thanks;

They make more money than everyone else (1)

Nicolas MONNET (4727) | more than 4 years ago | (#31134828)

What would you accuse them of?

Re:Class action lawsuit ? (1)

furball (2853) | more than 4 years ago | (#31134902)

Microsoft doesn't pay dividends.

Re:Class action lawsuit ? (2, Insightful)

Anonymous Coward | more than 4 years ago | (#31134904)

Dividends? How quaint! The profits are there to line the CEOs pockets and to allow 'journalists' to fluff up the share price. The only way you (or any outsider) to make money is to buy low and sell high. Investing is so last century. Gotta Gamble Baby!

Re:Class action lawsuit ? (4, Interesting)

nine-times (778537) | more than 4 years ago | (#31134946)

IANAL either, but I don't believe a stockholder can simply sue a company for not being profitable enough. I know you hear all about how a CEO's only responsibility is to make short-term profit for shareholders, but I'm under the impression that it's quite a bit overblown. I believe it's more like, if you can show some kind of unethical behavior where they're purposefully sacrificing profits for personal gain, then you have some kind of case.

The way you hear it around here, you'd think a CEO can be thrown in prison for failing to screw an old lady out of her last dime because he has an enormous legal responsibility to maximize this quarter's profits. I have a hard time believing that.

Re:Class action lawsuit ? (4, Interesting)

Fnkmaster (89084) | more than 4 years ago | (#31135034)

The short answer is no, you can't do that - they aren't losing the profits, they just may be investing them in other projects that have created business lines that aren't so profitable. That isn't illegal, it's a strategy, and it may eventually pay out or it may not.

Now, there are tools like filing proxies, or getting your own board members put in place, that are possible for groups of shareholders working together which can put significant pressure on companies to change their capital structure, dividend policies, share buyback plans and so on. And those have worked to some extent with Microsoft, which was pressured into paying out a huge one-time cash dividend 4 or 5 years ago.

Eggs all in one basket, and an old basket at that (4, Insightful)

Palestrina (715471) | more than 4 years ago | (#31134642)

They make their profit on their monopoly products and lose money on almost everything else. That is why the methods they use to maintain these monopolies continue to be the subject of antitrust investigations.

This also demonstrates that they are very good at maintaining their monopoly, but not so good at successful new product development. With a stagnant pipeline, they are especially at risk as FOSS alternatives like Linux, Firefox and OpenOffice become less "alternative" and more "maintstream".

Google is similar... (1)

teknopurge (199509) | more than 4 years ago | (#31134654)

in that they have a single-source of revenue. Discounting the pocket-change that they make elsewhere, take away google's ad revenue and they would cease to exist. Would the same be said of Windows and MS? Maybe Office or 360?

Re:Google is similar... (1)

TheRaven64 (641858) | more than 4 years ago | (#31134900)

The difference is that Google is only a little over a decade old and is trying hard to diversify. Microsoft has been making most of its money from operating systems and office suites since the '80s. The first version of Word was released in 1983 (for a UNIX system, in a strange twist of fate), and it has been a major part of their revenue since the Mac port in 1985. Their first OS was Xenix in 1980, and since then they've spent a lot of money on DOS, OS/2 and Windows NT, but operating systems still account for most of their revenue.

The only real chance since the mid '80s is that they no longer make much from developer tools. Microsoft BASIC used to be their primary source of income. Now they make a token amount from Visual Studio and have to give away most of their developer tools (because their competition does, and developers would just use something else if they couldn't get Microsoft's tools cheaply enough). This should serve as a lesson to them. Any software market eventually reaches the point where the last version is good enough for most people. OpenOffice.org is probably better than Office 97 in just about every way (with the possible exception of the database), and for a lot of people Office 97 was good enough. If it had long-term support, they'd still be using that. The only reason to upgrade is support for the newer file formats. The same with operating systems. What does Windows 7 give the average user that Windows XP (or even 2000) didn't? If a free alternative is similar in terms of features to XP, why not use it instead of Win7?

Re:Google is similar... (1)

thetoadwarrior (1268702) | more than 4 years ago | (#31135224)

Google does kill off products. So when will MS kill off Bing, Zune or the 360?

Sept and Dec (0)

Anonymous Coward | more than 4 years ago | (#31134662)

The two most notorious months where we are subjected to those awful Microsoft advertising blitzkrieg's. Sept/Dec. That's when parents buy their young students a new laptop with MS OS included and gift them with a shiny new console for well,,, you know,,,study time. Then the students being somewhat more intelligent spend their money on beer and pot, so on mass reject any of the online crap that M$ tries to push. I see perfect sense in the charts.

That's pretty consistent (2, Interesting)

HangingChad (677530) | more than 4 years ago | (#31134686)

Office and Windows have been their big profit centers for a long time. The big surprise there is that Office looks like it accounts for slightly more of their overall profit. And it was a surprise to see the margin on the server group. Back in the day I worked in a MSFT shop, it seemed like every day we were shelling out money for some license, another CAL or connector because the one we got didn't cover internet connections during a full moon, the support subscriptions that would regularly see large price increases, a piece of support software that was expiring. It was an every day thing that someone would come in and need money for something. Getting on without Windows servers is a blissful breeze in comparison.

You can argue the merits, but I find OpenOffice and GoogleDocs work for me. At home and the office. When we replaced Office with OpenOffice at the shop there weren't any complaints about the change. We did field a lot of calls about how to do stuff (mail merge), but there wasn't anyone crying for Microsoft leeks and onions. Although we didn't have anyone doing a lot of footnotes, either. If memory serves that's one feature of Word that pays for itself in a research setting.

Re:That's pretty consistent (1)

Jaime2 (824950) | more than 4 years ago | (#31134854)

Office has always been the big money maker. It wasn't until Windows '95 that the desktop OS division started showing a profit at all. Server profits didn't take off until Microsoft starting winning the war against Novell in the late '90s.

I'm impressed (1)

assertation (1255714) | more than 4 years ago | (#31134704)

This graph impressed me.

It shows that Microsoft hasn't been significantly successful in diversifying the sources of its profits. MS Windows/Server tools aren't going anywhere soon. However, there are a number of alternative office suites out there, some low cost, that are user friendly. If a company with marketing intelligence and financial resources got behind one of them Microsoft could be in serious trouble.

really? (1)

DragonTHC (208439) | more than 4 years ago | (#31134738)

How is OO.O not taking a bite out of their profits?

Re:really? (0)

Anonymous Coward | more than 4 years ago | (#31134786)

Because it sucks ass?

Re:really? (0)

Anonymous Coward | more than 4 years ago | (#31134808)

Because it's not as good as Office, even with the cost.

Re:really? (1)

selven (1556643) | more than 4 years ago | (#31134846)

You can't see Microsoft's profits here and Microsoft's profits in a parallel universe without Linux/Firefox/Google/OO.O side by side. For all we know, in that other universe they could be making twice as much as they are here.

Re:really? (0)

Anonymous Coward | more than 4 years ago | (#31134870)

Because nobody uses it?

Re:really? (1)

thetoadwarrior (1268702) | more than 4 years ago | (#31135240)

I suspect MS' revenue from households buying Office is a tiny fraction of what their revenues from businesses are so until we start seeing OO.o (or Google docs) taking off in businesses then you probably won't see much happen to Office profits.

interest income? (2, Interesting)

jschen (1249578) | more than 4 years ago | (#31134788)

Microsoft has about $40 billion in cash. Surely interest income should be there somewhere, probably higher than Entertainment and Devices is on the graph.

Re:interest income? (1)

Hurricane78 (562437) | more than 4 years ago | (#31135150)

Interesting. I remember when that was $100 billion in cash.

Re:interest income? (3, Informative)

DaveGod (703167) | more than 4 years ago | (#31135218)

Finance income and charges are added/deducted after operating profits. Investors usually want to look at how a company manages it's finances differently to how they want to analyse operations. Wiki has an example income statement [wikipedia.org] .

WTF does Buzz have to do with Sharepoint? (1)

argent (18001) | more than 4 years ago | (#31134844)

Google Buzz, an add-on to Gmail that some have compared most closely to Sharepoint, one of Microsoft's enterprise tools.

Whiskey Tango Foxtrot, over?

Sharepoint is like a corporate wiki. It's got more in common with Google Wave... in fact Wave is like a cross between Sharepoint and OneNote.

So if Office makes all the money (0, Flamebait)

Thad Zurich (1376269) | more than 4 years ago | (#31134972)

then why isn't it better?

XBOX 360? (1)

Titan8990 (1581405) | more than 4 years ago | (#31134988)

What would really be interesting is see a comparison of profits from their OS division to their gaming division. Gaming is a huge industry and the Xbox is fairly popular. I would not be surprised if the gaming division kept up with the OS division but I can imagine the profit margin is lower for each game/console sold.

Re:XBOX 360? (1)

Titan8990 (1581405) | more than 4 years ago | (#31135018)

Just looked at the chart again. Their gaming/entertainments sales is actually so low, you can barely see it hidden around 0 with online services.

Re:XBOX 360? (1)

walshy007 (906710) | more than 4 years ago | (#31135128)

The only people making money off of this console generation is nintendo, and by the bucketload ironically.

Re:XBOX 360? (1)

NSIM (953498) | more than 4 years ago | (#31135090)

What, unless I'm reading the chart wrong, Windows + Server & Tools generated about 7-7.5B of profit each in the last quarter. Even if I'm reading the chart wrong and it's about 7.5B between them, on what planet could the Games business be generating more?

same story in Macintosh days (2, Insightful)

nerdyalien (1182659) | more than 4 years ago | (#31135042)

Recently I came across Guy Kawasaki's lectures. In one of them he mentioned, back in the 80s when he was a Mac-Evangelist, Macintosh department employees were given world class treatment like professional massage treatments during working days, First Class air tickets if the flight is 2+ hours etc.

But in reality, Macintosh wasn't earning a dime and continuing the spending spree of all what Apple II department was earning. In return, not a single Apple II employee was permitted to enter the Macintosh building.

I observe some similarity here in Microsoft too (i.e. one department earns, other spends). But seems it is not that bad.

In my humble opinion, I predict the demise of Office and Windows OS in next 10 years (maybe there will be cloud versions). I believe Microsoft will move into more enterprise/back-end technology space rather than remaining in desktop/consumer space (just like IBM). But nothing can be predicted to a higher accuracy, as the internet backbone is yet to achieve higher bandwidths and reliability, which is somewhat mandatory before a full migration in to a cloud based software eco-system.

Trustworthyness: Zero! (0, Flamebait)

Hurricane78 (562437) | more than 4 years ago | (#31135120)

The “article” does not contain a single info on where the data actually comes from. (Or have I missed it?)

Which makes it impossible to determine, if it is legit, or fake.
I also never heard of “businessinsider.com”, which means that they don’t have acquired any trust credit.

So there is really only one thing to do: Ignore the graph.
And give a negative credit to them, for failing to give credit (by|/) offer(ing) a source.

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