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Microsoft Profit and Loss by Business Area

michael posted more than 11 years ago | from the learn-economics-in-an-hour dept.

Microsoft 970

An anonymous submitter writes "The Register is reporting in this article striking new evidence of what in my opinion can only be described as abuse of their monopoly position. A recent SEC filing shows that they lose money in every business area except Windows (86% profit) and Office (79% profit)." Another notes that the Financial Times has a story on the same subject - Dr. No writes "According to the Financial Times, Microsoft's Windows division has a profit margin of 85%. This is the first time this figure has been made public." The full version of Windows XP costs about $300.00. Microsoft could sell it for $45 and still make a profit. The difference between the $45 price and the $300 price is what economists call "monopoly rents".

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This profit subsidizes the rest... (2, Insightful)

Anonymous Coward | more than 11 years ago | (#4693487)

...of the MS products. You're getting a good deal.

How can the OSS socialists argue against that? (0, Flamebait)

Anonymous Coward | more than 11 years ago | (#4693530)

They can't. It's quite the conundrum for them. They'd have to argue that MS should act like a capitalist instead of a welfare entity, which goes contrary to all OSS dogma and propaganda. Talk about being caught by the ball hairs by MS on this one.

Re:How can the OSS socialists argue against that? (5, Insightful)

JessLeah (625838) | more than 11 years ago | (#4693586)

I'll bite the bait this troll is dangling in front of us.

First of all, MS isn't "acting like a capitalist"-- you're right on that accusation-- but they are certainly not acting like a welfare agency. Depending upon which aspects of MS's business plan you dislike the most, they are acting like "a software racket" (think of the Mafia's control of certain industries-- like that, only without all the guns and cement shoes and stuff ;) ), or perhaps "corporate fascists", or maybe "anti-competitive hypercapitalists". In reality what MS is doing runs contrary to several core concepts of capitalism... to wit:

The free market. It's not free if one company runs the show (almost) by their lonesome.

Competition. (See above)

Competing on quality and price, not marketing.

At least, that's how the "classical capitalists" would have it-- people like Adam Smith and whatnot.

In any case, MS's behavior in the past decade or so has been sort of a twisted mockery of what capitalism is "supposed to be". Look at what ths Soviets did to socialism-- twisted it into a monstrous nightmare. MS is doing roughly the same thing to capitalism-- wrecking it.

They are most certainly not anything to do with welfare...

Re:This profit subsidizes the rest... (3, Insightful)

rant-mode-on (512772) | more than 11 years ago | (#4693550)

  • This profit subsidizes the rest of the MS products. You're getting a good deal.
*BZZZT* WRONG! The profit subsidises projects that puts other companies out of business. The X-Box is currently losing $750M/year, and is set to rise. How can other companies hope to compete, or even break into that market?

Funny, no one mentioned price undercutting by MS. (-1, Flamebait)

Anonymous Coward | more than 11 years ago | (#4693608)

When are you OSS zealots gonna make up yout minds? If MS charges standard market prices (or even higher), you guys complain they're are greedy price gouging arses. Yet if they decide to charge less, or even be free, you complain about that. You can't have it both ways. comrade.

Re:This profit subsidizes the rest... (0)

Anonymous Coward | more than 11 years ago | (#4693616)

uh, microsoft is breaking into the market at an expense of $750 per year. That's how you get into the market -- and they're doing it....although they're failing dismally everywhere except the US (and a couple of other markets).

Hello, McFly? (-1, Flamebait)

Anonymous Coward | more than 11 years ago | (#4693619)

The stupidity of you slashdot people amazes me.

Microsoft is trying to use the XBox to break into a new market. How can other companies compete? I dunno, ask Sony and Nintendo.

I wonder (1, Insightful)

JessLeah (625838) | more than 11 years ago | (#4693488)

A) Where on earth they get this data?
B) If we can trust this data?
C) How MSFT makes money if it's only making money on two of its franchises? (I know they are BIG franchises, but still... think of how much money MSFT pours into its keyboards/mice/joysticks/flight sims/etc.etc.etc...)

Re:I wonder (5, Informative)

sconeu (64226) | more than 11 years ago | (#4693503)

A) Where on earth they get this data?
Post-Enron SEC filings.

B) If we can trust this data?
Gates had to personally vouch for this. The board faces personal (not corporate) liability if it's false. I don't think Billg wants to go to jail.

Been There, Done That (2, Interesting)

sconeu (64226) | more than 11 years ago | (#4693489)

Obligatory Duplicate Story complaint.

Friday on Slashdot [slashdot.org].

Re:Been There, Done That (5, Informative)

JessLeah (625838) | more than 11 years ago | (#4693524)

Not quite... the first story focused on one specific set of losses associated with the XBox, and featured a link to a story on the Beeb [bbc.co.uk]. This one is about all of MS's earnings (and lack thereof, as applies to the Xbox etc.) sheet-- and centers around a story on the Register [theregister.co.uk]. Also, have you ever noticed how sites headquartered overseas seem a lot more likely to make statements, or write stories, critical of MS? The mindshare MS has in the US is simply phenomenally huge...

Monopoly! (5, Insightful)

Cbs228 (596164) | more than 11 years ago | (#4693490)

Microsoft could sell it for $45 and still make a profit. Sure they could. Just like the RIAA could sell CDs for $5.95 and still make a profit. These guys make me sick!

Re:Monopoly! (0, Troll)

UTPinky (472296) | more than 11 years ago | (#4693600)

Just like the RIAA could sell CDs for $5.95 and still make a profit. These guys make me sick!

<sarcasm>But then the artists won't make any money. And after all, the RIAA is only doing this for the artists... or so they claim</sarcasm>

Re:Monopoly! (0)

Anonymous Coward | more than 11 years ago | (#4693630)

If MS would pay $45.00 I might put it on my desktop...

But that $45.00 would have to be a rent and they would have to pay it to me every hour...

uhhh... (1, Insightful)

Anonymous Coward | more than 11 years ago | (#4693491)

Red Hat Pro is up there as well, at $150...

Re:uhhh... (0)

Anonymous Coward | more than 11 years ago | (#4693522)

You're not paying for the OS, you're paying for the manuals and support.
Buy a Windows CD and that's all you get.

Re:uhhh... (4, Informative)

Binarybrain (253017) | more than 11 years ago | (#4693526)

Difference being that Microsoft is selling software and Redhat is selling service and support.

Re:uhhh... (0)

Anonymous Coward | more than 11 years ago | (#4693570)

very true, and thats an important distinction... but at the same time any time you order a Dell or Gateway Windows machine they typically throw in a year of support "free"...

if a new/intermediate user wants to use a Linux operating system the way they're used to with windows, they will still have to shell out the 150.

But yeah, your right its not exactly comparing apples to apples...

Re:uhhh... (1, Informative)

Anonymous Coward | more than 11 years ago | (#4693627)

Are you saying Microsoft does not support it's products?

that's not true.

Re:uhhh... (0)

Anonymous Coward | more than 11 years ago | (#4693548)

You get 1 years installation support and printed manuals.

Re:uhhh... (2, Informative)

deadhammer (576762) | more than 11 years ago | (#4693569)

Thing is, Microsoft has distribution centres worldwide, as well as dozens of manufacturing centres with manufacturing equipment that can stamp out hundreds of WinXP and OfficeXP CDs a second. Red Hat doesn't. Basic rule of manufacturing: Manufacturing/purchasing in bulk costs less per item. So the final cost per WinXP CD is far less than the final cost of the latest Red Hat distro. Thus, by all logic, Microsoft could sell WinXP for less money than Red Hat. The reason they don't is because, by looking at the article, it seems they need all that extra cash to support all those failing, yet competition-stifling ventures.

woot? (0)

Anonymous Coward | more than 11 years ago | (#4693492)

thirdpost.test

Sour Grapes, Troll (2, Insightful)

Gothmolly (148874) | more than 11 years ago | (#4693495)

That one division carries a company is NOT an abuse of their monopoly position. Keeping Netscape off the desktop with the threat of higher Windows licensing costs IS. Just because a company makes a profit in 1 area and loses in another doesn't make it abusive. And stop posting anonymously.

Re:Sour Grapes, Troll (1)

oliverthered (187439) | more than 11 years ago | (#4693568)

Microsoft was convicted for leveraging a Monopoly posstion in one market to gain control of another.

Re:Sour Grapes, Troll (2)

sheldon (2322) | more than 11 years ago | (#4693585)

Yes, through the use of the mechanism mentioned by the poster, "Keeping Netscape off the desktop with the threat of higher Windows licensing costs IS."

That case was resolved in the US courts, and now Microsoft is prevented from doing this.

Re:Sour Grapes, Troll (2, Interesting)

oliverthered (187439) | more than 11 years ago | (#4693617)

The last line of the registers story summed it up quite well.

"because in several cases these look suspiciously like ventures normal businesses would be forced to put a bullet into."

Re:Sour Grapes, Troll (5, Insightful)

rlwhite (219604) | more than 11 years ago | (#4693614)

You're absolutely right about it not being an abuse in terms of the letter of the law, BUT an 89% profit rate is a very strong sign that the market is bearing a heavy price for the monopoly. (Note that 20% profit rates are normally considered very good in most businesses, IIRC. 89% is almost unheard of.) Isn't this type of burden on the market exactly what anti-trust laws were intended to prevent?

Wrong. (4, Insightful)

oGMo (379) | more than 11 years ago | (#4693623)

That one division carries a company is NOT an abuse of their monopoly position.

When you're a monopoly, yes it is.

Just because a company makes a profit in 1 area and loses in another doesn't make it abusive.

Again, when your entire multi-billion-dollar monopoly which has widespread penetration in many markets is being supported by two out of thousands of products... that's abuse.

The key is that this isn't just any company. Sure, a normal company might choose to try their hand at a new market, supporting it with profits from another. But this is a monopoly, and they're using their monopoly to gain marketshare in other markets. All the other markets! This is the definition of such abuse.

Summary: do not compare this to "any other company". Whey we're dealing with a monopoly, the rules are different.

Re:Sour Grapes, Troll (0)

Anonymous Coward | more than 11 years ago | (#4693629)

That that one division lets them enter markets where they can lose 33 million on 17 million dollars worth of revenue, IS a sign of a monolopy. You didn't even read the article. Just karma whoring on this new found LOVE-MS platform that somehow filtered in.

85%? (2)

tunah (530328) | more than 11 years ago | (#4693496)

If they could sell it at $45 and make a profit, then their costs are less than $45, so the margin is ($300-$45)/$45 = 567% by my count. How do you get 85%?

Re:85%? (5, Informative)

Jason1729 (561790) | more than 11 years ago | (#4693536)

This is basic Economics 101.

It sell for $300, and the cost to produce it is $45.

That means the profit is $255 and the gross margin is $255/$300 * 100 = 85%.

Re:85%? (1)

lambadomy (160559) | more than 11 years ago | (#4693557)

(300-45)/300=.85

or, $2.48bn on revenues of $2.89bn

$2.48/2.89=.85 as well

85% of their revenue is profit.

Re:85%? (0)

Anonymous Coward | more than 11 years ago | (#4693565)

If they could sell it at $45 and make a profit, then their costs are less than $45, so the margin is ($300-$45)/$45 = 567% by my count. How do you get 85%?

wrong math. The equation is this one:

300 $ = 100 %
45 $ => 15 %

=> 100-15 = 85 %

Re:85%? (0)

Anonymous Coward | more than 11 years ago | (#4693567)

($300-$45)/$300 = 85% Dumbass!
It looks like you are trying to calculate the percent markup, which is $300/$45, but you did that incorrectly.

Re:85%? (1)

NortWind (575520) | more than 11 years ago | (#4693572)

How do you get 85%?

Most often they don't get full list price on a sale. When you buy a computer at retail for $500 with Windows XP and Office on it, you get a very deeply discounted copy. The price MS charges for those copies might be very close to their stated costs.

Re:85%? (2, Informative)

azpenguin (589022) | more than 11 years ago | (#4693587)

Actually, $45 is 15 percent of $300. If the cost is $45, then that means that 85 percent of the $300 is profit. That's how they do it in business. When they say to sell something at 30 percent profit, they mean that 30 percent of the total price is profit.

Re:85%? (1)

robhranac (173773) | more than 11 years ago | (#4693605)

Per unit profit margin = (sale price - cost to produce) / sale price. That is, the percentage of your per unit sales price that are profits. Note that you cannot have a profit margin greater than 100% unless your product costs you negative dollars to produce.

The correct calculation is: ($300-$45)/($300) = .85.

With these math skills, you might want to rethink your rather confrontational sig.

We Need a New Mod Classification (0)

Anonymous Coward | more than 11 years ago | (#4693613)

We need a new mod classification ... "Stupid, but I'm glad somebody asked"

Sometimes you wanna mod up stupid posts because the reponse deserves high billing, but modding up a stupid post .. looks bad heh.

So what now? (0, Troll)

attobyte (20206) | more than 11 years ago | (#4693497)

What is the government going to do about it? NOTHING... I think this is proof that they are pigs. This will never make it to the main stream media so no one will ever care. This is just something I can add to my list of why I hate M$.

Re:So what now? (0)

Anonymous Coward | more than 11 years ago | (#4693510)

What is the government going to do about it? NOTHING...

Which, since we don't have a Bolshevik government, sounds about right.

America: Hey, At Least We Don't Shoot You For Trying To Leave!(tm)

Re:So what now? (0)

Anonymous Coward | more than 11 years ago | (#4693554)

This will never make it to the main stream media

Just because FT is British doesn't mean its not main stream.

Breaking up was a good idea , (0)

Anonymous Coward | more than 11 years ago | (#4693502)

After all, then we wouldnt see these subsidies, and M$ would never be able to use muscle in new markets ... /penhead

Microsoft's profit, our loss... (3, Interesting)

EnlightenmentFan (617608) | more than 11 years ago | (#4693506)

Let's hope the Europeans can succeed where our courts have failed. Does MS sell software at a loss in order to wipe out rivals? This document deserves to appear at SmokingGun.com.

Re:Microsoft's profit, our loss... (2)

Pierre (6251) | more than 11 years ago | (#4693546)

I'm not sure that our courts have failed. Didn't they do what they were supposed to do?

Maybe it's our economic system that is failing or is it? Maybe the way our system is setup large corps rise to the top.

I don't know. It's hard to blame the court when people are willing to dish out the cash for the OS.

Re:Microsoft's profit, our loss... (0)

Anonymous Coward | more than 11 years ago | (#4693628)

I don't know. It's hard to blame the court when people are willing to dish out the cash for the OS.

That's the whole point ofa monopoly. People have no choice but "to dish out the cash for the OS."

Re:Microsoft's profit, our loss... (4, Insightful)

JessLeah (625838) | more than 11 years ago | (#4693609)

I'll put it simply.

The courts did not fail-- by their current definition of failure.

A more pro-Microsoft administration succeeded the previous one in the Federal government. Their idea of "failure" would be if MS did suffer.

When Bush took the white house, one of the first things I thought (after "Oh, shit!" ;) ) was "Well, there goes the MS case... they'll be let off with a relative slap on the wrist."

Which was, by most observers' assessments, just what happened...

Wouldn't want to abuse that monopoly position (5, Insightful)

Bob Bitchen (147646) | more than 11 years ago | (#4693509)

Come on who's posting this stuff? Essentially you're saying that you're okay with the monopoly but they shouldn't abuse it. That's crazy, but I guess that's what a monopoly can do to how people percieve the company. Microsoft can't innovate but they can dominate and they do that well. You try to keep quarter after quarter of growth in a company Microsoft's size and you too will find that you will have to do anything and everything.

Re:Wouldn't want to abuse that monopoly position (0)

Anonymous Coward | more than 11 years ago | (#4693588)

No, it's not crazy. It's the Sherman Anti-Trust Act and it's law.

If no-one else wants to get into the market then that's one thing and it's ok for a company to have a monopoly on it. If they compete and squash all competition, then they're doing a good job and what's wrong with the monopoly? If they just use their monopoly to squash the competition then it's illegal....sounds logical to me.

Re:Wouldn't want to abuse that monopoly position (5, Informative)

rodgerd (402) | more than 11 years ago | (#4693589)

That's the whole point, though: under US law, there's nothing wrong with having a monopoly per se. That just means you're wildly successful and everyone wants your products.

There is something wrong with abusing that monopoly to shut out competition (denying people choice) or leveraging that monopoly to compete in other markets (eg, using the DirectX and Win32 API to compete in the games console market).

It also suggests that Microsoft could get hammered under various nations' anti-dumping laws, since it would appear they're selling goods at well under the cost of manufacture.

Office suite wars (5, Interesting)

azpenguin (589022) | more than 11 years ago | (#4693511)

This shows the potential danger that StarOffice and OpenOffice pose to Microsoft if they ever get off the ground in the way that many would like them to. Especially if OpenOffice gains a large foothold in the business world - it would put serious pressure on all Microsoft divisions to make up the lost Office profits. If Linux ever gains a significant desktop share, this could get good.

Re:Office suite wars (0)

Anonymous Coward | more than 11 years ago | (#4693574)

Yeah, I'm sure they'll be shaking in thier shoes.

Linux/Open Source will never become dominant, primarily because you all don't want it to be dominant. That would spoil the elitism of it all. And you wouldn't have MS to whine about.

Linux fails on the mass population desktop. Pure , plain, simple.

and if id ever got to the point (5, Insightful)

deft (253558) | more than 11 years ago | (#4693513)

where for some reason they needed to compete with linux on the desktop.... how hard would the linux sell be when windows is 45 bucks...

Re:and if id ever got to the point (0)

Anonymous Coward | more than 11 years ago | (#4693592)

then they would not be able to market and sell their other products the way they're currently doing.

The high cost of Windows helps them to sell all their other stuff (Xbox for instance)

You all could stand to learn some economics (1, Interesting)

Rombuu (22914) | more than 11 years ago | (#4693514)

The difference between the $45 price and the $300 price is what economists call "monopoly rents"

Oh bullshit.

If MS really had a monopoly, why aren't they charging $1000 a copy then? Just because they have a high profit margin, doesn't make it monopoly rents. Go down to your local jewery shop... those places routinely have 100 - 200% markups on items for sale... now tell me they have a monopoly on jewerly.

Re:You all could stand to learn some economics (2, Insightful)

Anonymous Coward | more than 11 years ago | (#4693540)

Ever heard of Debeers?? Its the reason that you can have a 2000% much less 200% markup on diamonds, fucking cretin, research before posting!!

Re:You all could stand to learn some economics (1, Insightful)

Anonymous Coward | more than 11 years ago | (#4693547)

>>If MS really had a monopoly

dude, they were convicted in a court of law. even the biased judges agreed they had been abusing their monopoly.

Re:You all could stand to learn some economics (5, Insightful)

JessLeah (625838) | more than 11 years ago | (#4693549)

They aren't charging $1000 a copy (or $2000, or more) because there is a limit people will stand-- in this area, at least (and perhaps only in this area). Joe Consumer won't care if you tell him "This OS is made by an evil candy-from-babies-stealing monopoly with flappin' heads and beady little eyes", but he WILL care if you say "Hey, did you see that new Windows on sale at Best Buy? It's a thousand bucks!"

I've found that most Americans remain quite apathetic to anything and everything, in general-- until you make it blindingly obvious that something will hit them in the wallet.

Saying "Windows is made by a monopolist" doesn't get them riled up.
Saying "Windows will now cost $1,000 a version" does.

Why? Simple. Since they feel that Windows is great, and therefore "worth" $300-- but $1000 gets it to the point where it's seriously impacting their finances. And that is where most Americans put their collective foot down.

Re:You all could stand to learn some economics (0)

Anonymous Coward | more than 11 years ago | (#4693593)

Then it isn't a fucking monopoly then is it? They are charging what the market will allow them to charge. If they raised the price significantly, then you would see more and more people abandon Windows for Linux or Apple.

Re:You all could stand to buy a new computer (2)

Qrlx (258924) | more than 11 years ago | (#4693645)

On top of that, most people get windows with a new computer. If you look at the $300 pricetag for Windows XP Pro full retail version, it strongly encourages you to just get a new Dell for $550. You get XP Pro, and a computer too. Unfortunately you get the lame-ass "system recovery" disk but with the most recent Dells I've seen that CD is just a Windows XP Pro CD without the fancy hologram. You can, for example, copy the I386 folder onto a blank hard drive and set up XP that way.

Personally, I just pirate the stuff. Or should I say, I set my system clock ahead to 2104 when installing Windows, and now the 30-day trial won't expire any time soon. (in XP there's a similar deal to make the activation clock get reset, though it's less elegant.)

By the way, I leared that system clock trick from contractors who were working at Microsoft. Apparently they had to do this on their test systems because they only had the trial versions of MS product. Go figure.

Re:You all could stand to learn some economics (1)

rizzuh (594786) | more than 11 years ago | (#4693606)

Monopoly rents, basic capitalism; same difference. Duh. Just to nitpick, Da Beers (or whatever) has a monopoly on diamonds and does control prices very well. Diamonds really aren't all that rare; certainly not worth what we pay for them.

Re:You all could stand to learn some economics (5, Insightful)

adagioforstrings (192285) | more than 11 years ago | (#4693638)

If MS really had a monopoly, why aren't they charging $1000 a copy then?

Microsoft charges a price they believe the market will bear. They don't charge $1000 a copy because people wouldn't stand for that. That isn't to say the price could creep up to close $1000 in a few years (provided they will still be in the OS business). Actually, this issue is already covered in Judge Jackson's finding of fact in 1999. See this [albion.com].

Notice in particular the first sentence (emphasis mine):
Microsoft's actual pricing behavior is consistent with the proposition that the firm enjoys monopoly power in the market for Intel-compatible PC operating systems...Another indication of monopoly power is the fact that Microsoft raised the price that it charged OEMs for Windows 95, with trivial exceptions, to the same level as the price it charged for Windows 98 just prior to releasing the newer product. In a competitive market, one would expect the price of an older operating system to stay the same or decrease upon the release of a newer, more attractive version.

And this is all from 1999! How much have they (not) changed in three years?

Re:You all could stand to learn some economics (1)

NortWind (575520) | more than 11 years ago | (#4693641)

those places routinely have 100 - 200% markups...

If you are talking mark up, marking a $45 cost product up to $300 retail is a 567% markup. The MS markup makes the jewelry store markups look anemic.

And this is news... (1, Troll)

sparkz (146432) | more than 11 years ago | (#4693516)

because? MS profit on Windows and Office, their cash-cows. They use this profit to do other stuff. The difference between this any any other company would be ... what, exactly? This is not news, this is not even vaguely interesting. If MS made more from their mobile phone business than from Windows, that would be "News for Nerds" *and* "Stuff that matters". This is neither. It isn't even news (and hasn't been for at least a decade)

monoploy abuses (1)

parnold (119081) | more than 11 years ago | (#4693517)

we all know that microsoft abuses its monoploy but nothing is going to happen about it. microsoft the antitrust case but avoided any real punishment. until real punishments are enforced this is going to keep comming.

Accounting Discoveries??? (2, Interesting)

Dr.Hair (6699) | more than 11 years ago | (#4693518)

Does anybody remember how hard it was for the government to get information on their billing practices from Microsoft during the discovery phase of the trial that just ended?

Microsoft said that their books were too difficult to understand and that they wouldn't let the government have direct access to all of the electronic data, even after a court order on the matter.

Does this new breakout of information have something to do with Microsoft being slapped on the wrist by the SEC for accounting irregularities?

Is business of good source? (0)

Anonymous Coward | more than 11 years ago | (#4693519)


I do not know muchs about United States law, but here we do not allow profits that are not hard for the consumer. Some companies can not make competes, so they allow them to have prices that are level with all companies. Microsoft sells software here, but they do not charge huge rates because of laws, and I can buy Office or others for same costs. It is also laws to not sell products for less than more of cost to make products to sell. Good law to follow for United States.

Sheesh (1, Troll)

Reality Master 101 (179095) | more than 11 years ago | (#4693520)

The full verison of Windows XP costs about $300.00. Microsoft could sell it for $45 and still make a profit. The difference between the $45 price and the $300 price is what economists call "monopoly rents".

And what do they call it when Red Hat could sell it for fifty cents instead of the $300 (or whatever it is) for the server version?

Once again, Michael has absolutely no clue what he's talking about.

Re:Sheesh (0)

Anonymous Coward | more than 11 years ago | (#4693581)

hello, clueless....a server version is available for the cost of a download. f'ing troll.

Re:Sheesh (2)

npietraniec (519210) | more than 11 years ago | (#4693582)

I doubt they could make a profit by doing what they do for 50 cents... Not that I'm defending their prices, I don't know enough about it. I somehow doubt you do, either.

Re:Sheesh (1)

Gaima (174551) | more than 11 years ago | (#4693611)

*Crappy* example (complete with made up figures):
RedHat $3,000,000 R&D / 100,000 users = $30
Microsoft $30,000,000 R&D / 10,000,000 users = $3

RedHat = $40-$150
Windows = $300

Server versions of RedHat do cost more, but so do server versions of Windows.

Yes, RedHat *could* sell it for the cost of the medium, plus something for the time, etc. But the massively smaller user base, and the effort/code they do put in costs more per user.

Re:Sheesh (1, Flamebait)

cscx (541332) | more than 11 years ago | (#4693622)

Yes we all know this because Michael has an MBA and a degree in economics, and is a world-renowned economist and well-respected politician. And all this time, we thought he was just some red-Commie failed computer adminstrator nitwit fuck that continually posts off-base anti-Microsoft propaganda on Slashdot without any credible evidence. Boy, were we wrong!

Market (2, Insightful)

Junky191 (549088) | more than 11 years ago | (#4693528)

The market has a way of working these things out. If MS charges too much, people won't buy the product, and their business model will fail. PEople forget that the consumer determines prices by choosing whether or not to buy. This $300 has been dictated by the consumer, and will only change when the consumer changes, monopolies have no bearing on this fact.

Profits? (5, Interesting)

BWJones (18351) | more than 11 years ago | (#4693529)

From the Financial Times article: Bill Gates, Microsoft's chairman, speaking yesterday in Las Vegas at Comdex, America's largest information technology conference and show, warned that investors and pundits were becoming too pessimistic about the prospects for innovation in the information technology industry.

Of course we are becoming more pessimistic. When any one company can afford to loose billions of dollars running other companies out of business while creating inferior products, of course we are going to have less innovation.

Necessary (3, Informative)

man_ls (248470) | more than 11 years ago | (#4693537)

Microsoft OS division has a profit margin of 85%.

That's great.

Microsoft's X-Box division has a profit margin of -300%.

The OS division is where MS gets the cash to pour into products that will never turn a profit, or at best break even; the services they're providing (even for a charge) that are good to have but aren't really marketable, or are only marketed by MS for the sole purpose of having a presence in that market, without hope of actually taking over.

Certainly not abuse! (1, Insightful)

krazyninja (447747) | more than 11 years ago | (#4693538)

How can this called as an abuse? Companies exist to make profits. If there is a monopoly, the profit margins tend to be higher. I fail to see how this can be termed as an abuse. We can talk about the practices followed by MS to gain its marketshare as an "abuse", but marking up the profits is IMO not an abuse, being in a capitalist economy.

what about 10 years ago? same story...not news (5, Interesting)

blastedtokyo (540215) | more than 11 years ago | (#4693541)

Go back 10 years. Microsoft's main revenue drivers in 1992 were uh, Windows 3x and Office 4.3. Arguably Windows had pretty good market share but Office was still losing to Lotus 1-2-3 and Wordperfect.

Go back 15 years. Microsoft's main revenue drivers were DOS and ummm Word for DOS. Languages contributed more then too (although I'd argue that MS has much more dominant share of DOS/Windows development tools today than they did 15 years ago)

We're not talking monopoly rents. We're talking about how some parts of your business become cash cows and support other parts of your business that they believe are worth investing in and will one day become profitable.

Lost hope for legal fix (1)

j_dot_bomb (560211) | more than 11 years ago | (#4693544)

So more evidence they are a monopoly using their profits to clobber new areas ? After what happened with the settlement I have lost any significant hope of legal fix for this. Yeah maybe the EU will get them but somehow I feel microsoft will squirm around it. My only hope of not destroying them but just making them struggle like any other competitive firm, is for linux to start making real headway on the desktop like it seems to be doing in some countries / regions.

Ahhh the XBox conquers (1, Insightful)

bobsta22 (583801) | more than 11 years ago | (#4693556)

Soooo - we learn little, and see all. MSchlop breaks all with its monopoly in the OS/Apps area and is then allowed to use that power to stamp all over other industries.

Thus, it can subsidise its XBox and kill off the Sony/ Ninetendo et al by slowly strangling rather than producing the games/technology. Skinning us for cash when its got a grip that cant be shaken loose.

Of course, in a country where the Presidents brother can 'gerrymander' an election, and the President cowtows to the OilCorp - where the judiciary is too scared to tackle this behmoth, well, we shouldnt be amazed. We arent, are we?

Annoying (1)

fisgreen (568052) | more than 11 years ago | (#4693559)

Annoying, but not suprising. Remind me again why I'm supposed to feel guilty about using the same legally purchased copy of W2K on--GASP--two machines in my own home?

Move to Redmond.. (2, Interesting)

James_G (71902) | more than 11 years ago | (#4693560)

That's what I did.. I know enough people who work at Microsoft that if I need a copy of XP or Win2k or whatever, they can get it for me at the employee store. Last time I checked 2K pro went for $25 and XP went for $35.. Sounds far more reasonable than the $400 or whatever they charge retail :)

Bashing party! (5, Insightful)

targo (409974) | more than 11 years ago | (#4693561)

Of course, the poster doesn't mention that
1) The server applications are also strongly in black.
2) These numbers do not reflect the cost of MS Research. MSR is costing Microsoft a hefty sum every year, and they actually do provide many interesting things, especially for Windows internals.
3) All the segments that are in red are relatively new (except MSN). In the tech industry it is very common for new products to produce a loss for the first few years. Why should be any different for MS?

But hey, don't let a few insignificant facts distract you from waging a holy war ;-)

Bullshit (0)

Anonymous Coward | more than 11 years ago | (#4693563)

Just post the news michael, leave the reactionary bullshit for the replies.

some of this is a joke (2)

NotAnotherReboot (262125) | more than 11 years ago | (#4693566)

Take a look at "Exhibit 2: Identifying Monopoly Overcharges."

It says because from 1981 to 1990 the price to OEMs dropped from $40 to $19. Then they assume that the trend should have continued...and based on the chart microsoft should be paying us money to use it, anything more than that is "overcharge." I could do without deceptive little graphs that attempt to skew the numbers.

Its not abuse (1)

RealityProphet (625675) | more than 11 years ago | (#4693573)

Its not abuse to use net income from one area of operation to finance another. Its only abuse if it forces out competition.

I don't exactly see Palm making money in the handheld market.

In the gaming market, it is a well-known practice to sell your hardware at a discount. It takes a while for a company to actually start seeing net income, and perhaps never from the hardware.

I'm sorry, but you can't begrudge microsoft because they have lots of money. Every company entering new markets loses money. That is why so many startups have negative EPSs. Microsoft aggresively targets new markets, but they have the money to offset their losses.

Everyone's complaining because... (0, Troll)

The Ancients (626689) | more than 11 years ago | (#4693575)

Microsoft see their 'window' of opportunity, and take it...and take it...and take it..and keep taking...

MS stocks on Monday (2, Interesting)

certron (57841) | more than 11 years ago | (#4693584)

I'm curious to see what this will do to the MS stock price. Right now I'm thinking nothing, as I'm sure there are numerous companies of similar constitution who also run a few extremely profitable divisions and few to many money-losing operations. As much as I hate to say it, Microsoft being "evil" probably has nothing to do with this practice.

It is interesting, though, to think about what would happen if their major revenue streams were to be threatened somehow... I have suspiscions that some of the books at MS have been, how you say, grilled to perfection?

Probably the best thing to remember is this: Developers, Devel... oops, Diversify, Diversify, Diversify!

Wow, who knew (0)

Anonymous Coward | more than 11 years ago | (#4693595)

That killing people was so expensive? But I guess those sacrifices to Satan pay off... keeping Bill the richest man in the world and all.

MS Is just too big. (0)

Anonymous Coward | more than 11 years ago | (#4693596)

Their business concepts are mainly this - Find some companies to steal market share from and then throw enough money at the project to make it happen - ie XBox! MS is getting too large and bloated like their software products they make. In the future, for their company to grow, they will need to branch off into separate entities. If they do this, they stand to win in the long run, if they don't they will continue to fail.

-pez
pezzor at yahoo dot com

Still to expensive! (1)

hazzzard (530181) | more than 11 years ago | (#4693598)

[...] Microsoft could sell it for $45 and still make a profit.[...]
Well, could they?
Even then, many would not be willing to pay the price, I guess.
If you can get something so much better [kernel.org] for free ...
Since we have a site license here,
I could have all the crap MS produces for free,
but even with that, I don't feel like it.

Goodwill (0)

Anonymous Coward | more than 11 years ago | (#4693607)

Interesting reading on the goodwill figures. Goodwill increased from $1,426,000,000 to $2,855,000,000 in just 3 months. (Page 2 of the financial statements). Ohhh... but it's unaudited. Never mind then.

What about warez items? (4, Interesting)

Eric_Cartman_South_P (594330) | more than 11 years ago | (#4693610)

If someone is found guilty of pirating warez, lates say Windoze XP... should the company value its "loss" at the retail level, the fair market value, or the cost of production? All said and done, if a company found guilty of abusing it's monopolistic powers, which also pads its prices with monopoly rent, should the courts normalize the value of said companies goods when the value must be assertained?

I'm skeptical (2, Flamebait)

elliotj (519297) | more than 11 years ago | (#4693615)

I have a problem with this for 2 reasons:

1) Profitability in something like software is tough to gauge from looking at a balance sheet. Productivity is notoriously hard to quantify and the cumulative R&D costs that represent Windows are probably not represented in the same sense as sales and profit for a given year. It's no surprise they lose money on other products, but the fact that Windows in profitable allows them to do so. I suspect the same economics govern other R&D heavy companies: like Intel, Motorola, IBM etc.

2) Even in non-R&D heavy companies, many products have massive profits. How much do you think a cup of coffee costs for Starbucks to brew? There are plenty of products that produce well in excess of 100% profit margin. Why should Microsoft be criticized for margins over 70% on two products?

In general I find it pretty repulsive when people bash Microsoft for making money. If you don't like it, buy a Mac or use Linux. It's really not hard to Microsoft free. It's your choice.

This is good... Let's wait and see what happens. (1, Interesting)

muixA (179615) | more than 11 years ago | (#4693625)

I'd like to purpose one possible interpretation of this data: They are doomed, and they know it.

Why are they doomed? If a majority of there profits come from the OS and the Office suite, what happens when there is a major competitor, like Linux / Open Office?

The fact that they are trying to hard to break into new markets, indicates to me that they feel the cow has a limited life span.

No matter how much cash a company has, they cannot continue to spend money on failing venturers, share-holders don't like that...

Anyway, spin it how you like. I've felt this way for a while. I don't see them as having a real monopoly, there are alternatives, people just find the MS assurance worth the price, for now. It's not as if they have or infrastructure, real capital that no one else can match (like railroads, or telephone poles). They make software, and they make a lot of money making some of it, if suddnely the world doesn't want it anymore, they have nothing.

--
Matt

Anti-Microsoft Squad Strikes Again (2, Insightful)

Arandir (19206) | more than 11 years ago | (#4693634)

striking new evidence of what in my opinion can only be described as abuse of their monopoly position

Every piece of proprietary software that makes a profit is in exactly the same position. So why pick on just Microsoft? The monopoly isn't limited to Microsoft, but available to anyone that has a copyright.

I know it's fun picking on Microsoft, especially after some of the stupid stunts they've been pulling, but before you start waving evidence around, stop to think about what it means.

One example: Ximian Connector. Proprietary software. Currently selling for $69 single user. If Ximian can sell this piece of non-free software for $39 instead of $69 and still make a profit, then Ximian is a monopoly!

No, it's what the market will bear (2, Insightful)

I Am The Owl (531076) | more than 11 years ago | (#4693637)

The full verison of Windows XP costs about $300.00. Microsoft could sell it for $45 and still make a profit. The difference between the $45 price and the $300 price is what economists call "monopoly rents".

That's just an outright lie. Do you know what a monopoly is? It is one company selling one product that has absolutely no close alternatives. Is that to say that nobody on Slashdot uses Linux, or MacOS?

Honestly, your inflammatory editorializing and FUD are giving the Open Source community a bad name. Most of the rest of us, as you may have noticed, are not a bunch of whining, ill-informed teenagers.

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