Microsoft Profit and Loss by Business Area 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".
Monopoly! (Score:5, Insightful)
Re:Monopoly! (Score:4, Insightful)
High profit margins don't make you a monopoly. Let's put aside for a moment the fact that a significant portion of that $300 price per unit (the store purchase price) is going to various middlemen. Windows costs $80 as often as not. [pricewatch.com] Not intended as an advertisement, it is just the first quote I grabbed. Also, I'm sure that MS could charge less than $45 and still make a profit - since they'd sell more copies. We'll put all of that aside.
Are their prices out of line for software, generally? Higher than the cost of Linux doesn't count. Is their profit margin out of line for successful software makers in other areas? How much could Blizzard sell Diablo II for and still make a profit? What about other business software bendors - GraphPad software, say? Has anyone examined them to see if they're making too much money on their $400/desktop prism software?
MS has priced their product (successfully, I'm sure) to maximise their profit - which is NOT the cheapest price they could charge, any more than the same is true for Coca-Cola. This is a feature of our modern "capitalist" society; competition only goes so far in the face of advertising and consumer apathy. It has nothing to do with being a monopoly.
Re:Monopoly! (Score:5, Insightful)
People feel they don't have a choice with windows and so will pay a lot for it. If say an equaly compatible operating system with as much consumer awareness and (percieved) ease of use as windows came along and sold for 40 bucks, microsoft would have to slash it's prices for people to continue buying their product. Same with Office (yes I am aware of StarOffice ect... see consumer awareness)
Just look at the XBox/PS2 thing.... Microsoft can't charge what it would like to charge for XBox; it has to keep it's prices in line with playstation. This forces ms to sell their boxes at a loss!
The bottom line is, if Microsoft had serious competition who was selling it's product for less than MS, microsoft would have to cut prices to remain competitive. Since it does not have serious competition (yet) they can charge whatever they like!
Re:Monopoly! (Score:5, Insightful)
Remember that a whispering campaign by Microsoft alowed them to kill the first competing GUI OS for the PC (merit of competitor's product beside the point) while getting the market to wait for Windows 1.0. Hey, MS didn't even have a product to compete with.
I refuse to buy the concept that some utopian Free Market is better than a regulated one. It all falls apart when you accept that in today's day and age a truly informed consumer that is swayed by hard fact and unmoved by corporate propaganda doesn't exist. Even the Christian Right could not effectively boycott Disney and its byzantine array of subsidaries(sp.)And the only good monopoly I've seen so far has been the NFL.
And btw, MS didn't have a patent in its pocket to become a monopoly. I may hate software patents and think they are an abomination but they aren't the one true reason of why monopolies are bad.
Re:Monopoly! (Score:5, Insightful)
Again, having a monopoly is not illegal. Abuse of a monopoly, either through anti-competitive behavior or through price gouging, is illegal. Why? Because it makes for inefficient markets and lowers the excess utility for everyone (except the monopolist of course). And it looks like Microsoft has been screwing the market in more ways than one.
Re:Monopoly! (Score:3, Insightful)
Re:Monopoly! (Score:5, Interesting)
The research that Microsoft does is not the issue. The jobs and software that Microsoft creates is not the issue. At issue is the fact that Microsoft is abusing its monopoly position to charge excessively in markets which it holds dominance (namely operating systems for the main OEM manufacturers of PCs and office suites). At issue is the fact that Microsoft is using the profits it gains from this abuse to extend its monopoly to other markets. At issue is the fact that Microsoft is effectively DUMPING their products in markets in order to gain market share. (This of course does not touch on their other abuses: API abuses, forced upgrades, fake deals, stealing trade secrets, coersion, forced bundling etc etc etc).
EnkiduEOT
Re:Monopoly! (Score:4, Insightful)
What is being presented is a claim that Microsoft enjoys abnormally high profit margins, and the question has been raised is whether those margins are, in fact, abnormally high. Maybe they are, but it's a valid question. Clearly, at least part of that margin is perfectly normal business, and michael's characterization of the entire margin as "monopoly rent" is just spew.
Re:Monopoly! (Score:4, Interesting)
Hold on for just a second. A can of coke costs about a nickle to make, can, ship and refrigerate and I just payed 0.75$ for it out of a vending machine.
High profit margins don't make you a monopoly.
Hang on, now to make this analogy more correct, you'd have to make sure that you almost never saw a vending machine for anything but Coke. Certain companies would make cups that could only contain Coke, and would be threatened if their cups were able to hold anything else. Everytime you wanted to take a sip, it would go flat, and you'd have to open a new can. Everytime that you wanted to buy a new can, you'd have to also buy a new cup.
get real, when people go to a computer store, and the salesperson asks them "What kind of computer would you like to buy?" they're looking for an answer like: {Dell|Compaq|Gateway|IBM}, -- Not linux, Mac OSX, FreeBSD, OS/2, etc.
Re:Monopoly! (Score:3, Interesting)
For example, Coke has a contract with my old university (UIUC) that only Coke products may be sold in vending machines around the campus. It's still $1 for a bottle and $.60 for a can, even though there's nothing to stop them from gouging us to hell.
Re:Monopoly! (Score:4, Insightful)
And let's put some things into perspective: XP Pro is $300. Jaguar is $130. RedHat is $40 (or $150 for the de-luxe version.) So why is XP $300? Because they can get away with it.
And with the billions of dollars of CASH in the bank and the sky-high profit margins I'd say its pretty obvious they are charging more than the market would bear, were they not a monopoly.
Furthermore, the example of your coke can is misleading. Coke actually has competitors. Also, I think you are vastly underestimating the cost of creating the product and very importantly the cost of stocking your nearby vending machine. It simply isn't an adequate analogy for the software industry.
Comment removed (Score:4, Insightful)
Re:Monopoly! (Score:4, Insightful)
There's only one question you need to ask yourself: was Microsoft found to be a monopoly by a Federal judge with that finding upheld in the Supreme court? The answer is YES.
Re:Monopoly! (Score:5, Informative)
According to the field of Microeconomics no firm will be able to maintain high profit margins in the long term unless they are a monopoly (or similar things like oligopoly w/ collusion.) In a real competitive market with low costs of entry, other firms will see Microsoft with such high profits and have incentive to enter the market, undercutting Microsoft. As the result of new firms entering, prices go down to a point of "normal or zero economic profit." This is how the competitive market works.
Microsoft is able to maintain such high profit margins because of their monopoly market position. Little other market factors would allow sustained high profit in the long term.
Microsoft's profit, our loss... (Score:3, Interesting)
Re:Microsoft's profit, our loss... (Score:4, Insightful)
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!"
Which was, by most observers' assessments, just what happened...
Re:Microsoft's profit, our loss... (Score:3, Insightful)
Windows XP fo $45? (Score:3, Funny)
Wouldn't want to abuse that monopoly position (Score:5, Insightful)
Re:Wouldn't want to abuse that monopoly position (Score:5, Informative)
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.
Re:Wouldn't want to abuse that monopoly position (Score:5, Interesting)
This is the kind of thing that can be considered an abuse of monopoly power.
Re:Wouldn't want to abuse that monopoly position (Score:4, Insightful)
Yes, that's the whole point. There's nothing wrong with a monopoly, per se. In fact, in many cases, it can be a big advantage (to customers) when a monopoly exists, as it eliminates subtle (and sometimes blatant) differences between different vendors' products. Cisco has been investigated several times by the SEC, and they definitely have a monopoly, but they don't abuse it. Their prices are still reasonable, they don't use tricks to lock out potential competitors, or give themselves an unfair advantage in new markets; they run an open, clean business, and they still provide a quality product at a fair price.
Office suite wars (Score:5, Interesting)
File formats! (Score:4, Informative)
Re:File formats! (Score:3, Informative)
Re:File formats! (Score:4, Funny)
<![CDATA[
acres of binary, secret gobbledygook
]]>
</Office-XML>
Re:Office suite wars (Score:3, Insightful)
Ms will effectively own your pc at the hardware level and you all will pay a monthly bill to use it. It's inevitable and will be the fact of life in a couple years. Linux will be effectivly dead in the pc market and ms will double there current prices for windows and office and still sell it cheap if you chose to rent it. Joe consumer will think MS office is standard because its better and not because ms crippled all pc hardware. Ask any user who makes the best software and %90 will say Microsoft. They do not and will not know any better and it wont matter how good OpenOffice is.
and if id ever got to the point (Score:5, Insightful)
Re:and if id ever got to the point (Score:5, Insightful)
I've paid zero for Windows (came with computers) but have paid over 500$ for various Linux distributions in the last years.
Was it worth it?
Sure it was, I can be more profitable using a real GUI than using Windows' single-desktop excuse for a GUI. (Windows XP's 4 measly desktops are too little, too late, sorry. I have barely enough space on KDE's 16 desktops. KDE1 was better but uglier than Windows. KDE3 is better and prettier.)
I now don't have to manage different versions of .docs
I no longer have to download, manage and install various add-on software because from office-suite to ICQ-client, everything is included in a decent distro.
I don't have to worry about worms, viruses and don't have to waste that much time on applying patches. (Sure I have to do it, but I waste much less time than I would using Windows.) I also don't have to care about virus scanners.
I can quickly solve any problem that arises. For example I have a script to prefix files with a given string. (simple shellscript) With Windows, it's of course possible, but it's much harder because I would have to learn VBscript which is different to normal commands.
Money is not the reason why I use Linux. Time is.
With Linux I am a much happier computer user than I was with Windows. I regained the ability to let the computer do exactly what I want, not just what some programmers thought of.
Re:and if id ever got to the point (Score:3, Insightful)
Not that it alters your post much but I buy most of my linux versions these days for two reasons: no broadband (don't want to wait through a week of downloading to get the new distro) and desire to support the linux developers in my current favored distro.
Profits? (Score:5, Interesting)
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 (Score:3, Informative)
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.
what about 10 years ago? same story...not news (Score:5, Interesting)
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.
Bashing party! (Score:5, Insightful)
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
Re:Bashing party! (Score:3, Insightful)
Re:Bashing party! (Score:5, Insightful)
Re:Bashing party! (Score:5, Insightful)
This only means that you don't pay income tax on that particular amount. It most certainly doesn't mean that R&D is free, it is just discounted by some small percentage. If your claims were true then everybody would spend all the tax money on R&D, and not pay taxes at all.
MSR in windows inernals? No. (Score:4, Informative)
MSR provides nothing to the Windows internals. What a ridiculous statement.
MSR is a prestige organization only, and MS pays huge for that 'prestige'. Every so often you will hear about something from MSR getting into a product, but let me assure you its all hype. Most things that actually do get into a product were built by people from the product team who changed orgs to MSR after the idea was already proven. And those are very rare too.
No, MSR is a worthless academic sideshow that will be cut off the day MS profits are unable to hide its wasteful useless bloat.
Re:Bashing party! (Score:3, Interesting)
Well, why don't you work out the numbers and let us know. So far, you are just making wild assertions with no support.
Re:Bashing party! (Score:3, Insightful)
I wounder how well would they fare without the monopoly on the desktop. My guess is they wouldn't even be on the chart (think Code Red & friends). On top of that thier monopoly on the desktop gives them the power to overcharge customers, squash competitiors, and finance forays into other areas...
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.
Ah? Can you come up with an example please?
So in theory... (Score:5, Funny)
What about warez items? (Score:4, Interesting)
The implicit Microsoft / Pirate partnership (Score:5, Interesting)
Actually, Microsoft should be paying the Pirates!
With extra copies of the software out there in use, the value of the software (which is proportional to its user base) is increased. Therefore, Priates are actually helping the monopoly along. For early adoption software, I'm sure Microsoft is very happy to have Pirates spreading copies to friends or anyone else in the market. More copies is less sales for competitors and greater chance that their file format will become the standard.
However, once a product hits 60% or some other magic number of market dominance, the software is ubiquitious and the Pirate isn't helping to "spread the word". At this point, the Pirate is a net loss for Microsoft, and they are actively hunted down. Further, all of those "non-prirate, good customers" who have, unfortunately, illegally installed copies; well, Microsoft will be very nice to them with their payment plans.
Moral: If you want to hurt Microsoft, don't use or help spread the use of their products.
High margins != monopoly (Score:4, Interesting)
What if people just EXPECT windows to cost more?
I know, it's faulty logic on MS's part; I recently bought licenses to all my illegal MS software because the university was selling them cheap. Before, I couldn't afford office and windows XP and vis-studio.net, so I stole them. Then I paid about 50 bucks and got licenses.
If they would just acknowledge that lower prices = less piracy and greater market penetration (esp. in poorer countries), then we'd all live in a happier world, wouldn't we?
Microsoft's Corporate Customers Won't Like This (Score:3, Insightful)
Most companies have profit margins no where near this obscene level. In retail, it's measured in fractions of a percent, in manufacturing it's generally well below 15%. I'm sure that this information will be put to good use when corporations demand negotiations on OS and product site licenses.
What really rankles me about Microsoft is the purposely shortened life-cycle of their products. I can't help but wonder if their software isn't purposely broken so you have to go out to Microsoft and get updates. Once you're in the habit of doing so, most companies would feel mighty exposed not to have currently supported software.
Combine this with Microsoft realizing that the OS/PC market has suddenly matured, they know their cash cow isn't going to be around forever. I'm sure it's a case of "gettin' while the gettin' is good".
I have faith in the free market system giving Microsoft their come-uppance. Many companies are realizing that life with Microsoft is far more intolerable than using works-in-progress operating systems (Linux) and applications (OpenOffice).
Re:Microsoft's Corporate Customers Won't Like This (Score:4, Informative)
They try to hide true stats from the employees too (Score:5, Interesting)
It was always embarrassing to here people talk about how great their product was doing according the the VPs. Anyone who'd been there long enough knows the truth, but dont rub it in peoples faces. Bad for moral.
Microsoft Profit (Score:5, Funny)
$2.9 billion in 'good will'... (Score:3, Funny)
MS should be worried (Score:5, Insightful)
Re:MS should be worried (Score:4, Interesting)
The diversification is not meant as a way to find new products to sale in order to have more profits. The diversification is meant as a way to sustain or extend the monopoly. The monopoly is based on the unavoidable duo windows/office which provides the cash flow to operate the monopoly. All derivative products and their strategy are always centered around keeping the duo unavoidable.
Take the browser as an exemple, you cant find a more unprofitable redmond product since it was never sold but given. It was never meant to be profitable. It was meant to destroy the netscape navigator and the risk of applications which didnt care about the underlaying os (think web apps and java). Now it's ok because anyone "need" ie to do that.
This is all in the finding of facts of the doj trial. Those losses are the top of the iceberg that is meant to destroy others.
Actually, as soon as people stop to pay a lot for something that is cheap (an os and an office suite), then the duo wont be a cash cow anymore in the minute. That must be what keep them awake. It's called open source.
Creative accounting (Score:5, Informative)
Of course, the SEC filing is not a lie, but Microsoft could choose any gross income they wanted for any given division, and it would be just as accurate, because it doesn't actually reflect any measurable difference in the world outside.
Consumer's Conception (Score:4, Interesting)
An extremely atypical profit margin (Score:5, Insightful)
The profit margins at Mcdonald's, jewelry retailers, and vending machine companies are very low. You have to take into account all the costs in calculating profit. Mcdonald's only pays $0.03 for the coke they are selling you, but they paid over $1 million for the building in which they are selling it to you, and over $200k/yr for employees in that building, plus costs for managers and benefits, to say nothing of corporate expenses, advertisements, and so on. Retail jewelry stores fail more often than any other kind of store. Sure, they charge a 100% markup, but they get like 2 paying customers per day, for which they must pay rent on a store and employees' salaries, etc.
An 89% profit margin is extremely unusual. IIRC, the average profit margin in American business is around 4%. The only other large companies that take anywhere near that profit are drug companies, right after marketing a "blockbuster drug" where there few competitive alternatives.
The Slashdotter's Paradox (Score:5, Funny)
Linux is a viable alternative to Windows.
Re:I wonder (Score:5, Informative)
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.
Re:I wonder (Score:4, Informative)
By not reading the article.
According to the article itself the parts of Microsoft that lose money are the parts that everyone already knew lose money. MSN, XBox, Windows CE and the Business Solutions division, all of which are in 'start up' mode, apart from MSN where the loss is narrowing.
Microsoft sure ain't losing money on Visual Studio, Money or their games. They probably make a profit on their keyboards and mice. They are just taking an expected loss on XBox until they can build a sufficient market share - which is likely to take until XBox 2 comes out
Also note that these are operating profits and not GAAP earnings. There is a big difference between the two. Basically operating profits only show one quarter of cash flow, to get a sense of whether the company as a whole is making or losing money you need to take into account how much it cost to build the product they are selling - which would have been billed in previous quarters as a 'loss'.
Given Microsoft's penchant for burying money... (Score:3, Insightful)
Odds are good that they're neither [billparish.com], and the fact that they still look bad should horrify you.
Re:I wonder (Score:3, Informative)
Re:I wonder (Score:5, Informative)
From the U.S. Securities and Exchange Commission:
http://www.sec.gov/Archives/edgar/data/789019/000
Re:Been There, Done That (Score:5, Informative)
Re:uhhh... (Score:4, Informative)
Re:uhhh... (Score:3, Informative)
Wrong! Windows 9x came from DOS, which Microsoft bought [about.com] from Tim Paterson. Windows XP came from Windows 2000 which came from Windows NT which came from a joint project [os2bbs.com] between IBM and Microsoft.
Re:uhhh... (Score:3, Insightful)
can you download windows XP, legally, for free?
i think it takes a whole different spin on things when a company can sell something for 150$ (and people purchase it) as well as give it away for free, and still be afloat.
k.
Re:85%? (Score:5, Informative)
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:You all could stand to learn some economics (Score:5, Insightful)
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 (Score:5, Insightful)
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):
And this is all from 1999! How much have they (not) changed in three years?
Re:This profit subsidizes the rest... (Score:3, Insightful)
- 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?Re:This profit subsidizes the rest... (Score:5, Insightful)
Of course, because the video game arena was profitable and easy to get into BEFORE MS entered. Well, except for Sega, they lost too much on the hardware and had to leave that part of the business. But, that must have been for some other reason. Neo-geo has done great in the US. Well, I guess they've failed before MS got into the market. There have been a LOT of companies over the years that have tried to get into this market before, and most all have died. Even veterans like Sega have had problems pre-MS.
In fact the only company in recent times that I can think of to successfully break into the video game business was Sony. Why was that? They had the money to make a great product and keep it afloat untill it really took off. MS is doing the same thing. For all the MS bashing here on /. (which I'm usually part of) you have to admit that the XBox is a great piece of hardware compared to the other consoles on the market. And being MS, they can afford to entice publishers and devote resources to helping them make the games look/run better.
Re:This profit subsidizes the rest... (Score:3, Insightful)
The specs of the system and the money involved have very, very little to do with the overall quality of the games. The Sega Genesis had jack for money and barely any developers against the NES behemoth. They didn't need money, they didn't need to "entice developers," they got a few good ones together that would work for cheap, made their own games for their own system, and gave Nintendo one hell of a run for their money. One could even say that the infusion of cash has been a bad thing for the industry, large markets have turned something that was very much an art form for decent profit to a big media market. When anything that looks somewhat pretty or is halfway entertaining makes a metric assload of money, there's much less incentive than there was when only the really great games got any sizable amount of cash. There's just no motivation anymore, which is why we can always predict that the great games are going to come from people like Yuki Naka, Yu Suzuki, Shigeru Miyamoto, their teams, and the projects they supervise. The names are so important because these are the people that still treat it like an art (except Yu Suzuki not so much anymore, but he hasn't had any public support since Shenmue flopped).
Also, it's pretty silly to call a console with UMA technologically superior to the others. Just because they throw fancy/powerful PC hardware in a box doesn't mean it's a superior gaming platform. The biggest point of a console is architecture, not raw power, not how impressive the hardware is, but how incredibly well everything works together. One of the best things Sony did with the PS2 was the emotion engine [arstechnica.com], while it had some serious oversights (lack of hardware antialiasing), it was a better attempt at a SYSTEM than MS's PC in a slightly smaller box. I don't know as much about the customization of flipper and the rest of the gamecube, but from what I know of the N64 I think I can assume that Nintendo knows what they're doing hardware-wise (aside from that unfortunate incident with the N64 cartridges). I know that someone's going to mention all the wonderful benchmarks that everyone and their mother with a dev kit has put out. Be sure to read what they're testing - 9 times out of 10, the benchmarks are just polygons without effects. Benchmarks on consoles are useless.
Re:Funny, no one mentioned price undercutting by M (Score:4, Insightful)
The real unanswered question is whether this is a death knell or call to arms.
All of you are wrong (Score:5, Interesting)
Without doing research, I can pretty reasonably put this in two words -- "bull" and "shit".
I'll be willing to be that two years ago, three years ago, all those markets were reported as profitable. And it isn't because of a "tech downturn" that dropped *everything* into red ink without managers doing any cost saving. No, you'd hear about divisions being cut, layoffs, everything if there were real losses.
It's pretty obvious what's going on. MS is making money, just as usual. A while ago, a big company went belly up because of "loss hiding" -- our old friend Enron. As a result of this, lots of laws were passed making executives and auditors legally liable for hiding losses, inflating profits, and tucking them into future good years. Perhaps more importantly, the current public opinion is to crucify execs doing this, and not to let the government let them off the hook easily.
What's happened is that our buddy MS has, like most large companies over the past few years, has been tucking away a few too many losses under the rug and artificially jacked up reported profits.
Now, all of a sudden, Bill G. and Co. could be doing hard jail time (to say nothing of their auditing firm) if they can be shown to be deliberately hiding losses for another year. So they want to get rid of their losses *now*. It can't wait for another year -- they have to show all those unreported losses and inflated profit immediately. Well, they can't say that Windows is losing money -- 2k to XP migration is critical right now, Linux is a threat, and looking less than stable would be an awful idea. They can't say that Office is losing money -- for the first time in years, competitors have just sprung up, including Open Office and even WordPerfect pulled a comeback. The Office product also has to be rock solid. So where are all those losses going? Right into these non-core markets. Everything else loses money to clear up the balance sheets.
This isn't just MS, either. You're going to see a *lot* of big companies doing this, and a *lot* of negative filings, as companies have to avoid giving away past reporting falsehoods.
Now, I haven't looked at their past sheets. If this is consistent with past filings, I'm wrong. But I'd quite confidently bet that I'm not.
Re:This profit subsidizes the rest... (Score:3, Informative)
Re:This profit subsidizes the rest... (Score:4, Insightful)
Now I'm not the average slashbot who runs nothing but Linux from his home computer to his coffie machine, but what I got from the article is that Microsoft is sustaining a foot in the door of a market that doesn't want them. If they are loosing money making mice and keyboards, our economy is set up so they would have to inovate or go out of business. Microsoft is the exception to the rule. They can keep on producing their products even after the market has voted them as the weekest link. The fact that Microsoft is using sales of its other products to continue to produce infirior hardware is not fair to the consumers who have already choosen Logitech and Genius. Two companys who produce amazing hardware and make a profit at it. I don't know about you, but I'm not sure how long I'd last without MY Genius NetMouse Pro.
Re:How can the OSS socialists argue against that? (Score:5, Insightful)
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
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:Huh? (Score:4, Insightful)
1) One small good deed does not cancel out many large bad deeds.
2) IE is actually not a buggy piece of anything-- I personally think it's quite nice. I merely dislike it because of the morals of the people making/pushing it.
3) Putting words in my mouth does not mean I agree with them. There will always be situations where companies will release some things at a loss or for free-- it's the concept of the "loss leader". Look at how many video game companies routinely lose GOBS of money underselling their consoles. They make their money on the cartridges/CDs. That's a very common and acceptable course of action.
Do you really think your cell phone company (assuming you have a cell phone) makes money off of the sale of cell phones?
Re:Huh? (Score:5, Insightful)
Boy. You don't even kind of get it, do you?
Giving away software isn't what makes MicroSoft a monopoly. Using their leverage as THE MAIN supplier of household Operating Systems to distribute this software, to the exclusion of others, with a toehold in the OS that other browsers will not have and then, ultimately, claiming that the browser is INEXTRICABLY intertwined with the OS -- all of these things are what make MS a monopoly.
Repeat after me: It's not giving away software, it's unfairly using an advantage and obstructing others that makes MicroSoft a monopoly.
I don't think most people would care if MS kept to standards, but that's another story.
Re:Huh? (Score:3, Insightful)
The "abuse" of that monopoly (using monopoly power to leverage other business in a way that gives MS an unfair advantage) is the illegal part.
While I agree that "most people" don't care if MS used standards, I would bet that "most computer professionals" DO care, yet due to the monopoly issue can do very little about it. MS's failure to adhere to standards (and the embrace and extend practice) makes it REALLY flippin hard to interface MS systems to other non-MS systems.
Re:Sour Grapes, Troll (Score:5, Insightful)
Re:Sour Grapes, Troll (Score:3, Insightful)
Okay, here's how it works. People who buy computers have a reasonable disposable income. They also feel windows is a necessity for their computer. Therefore their demand for windows varies little with price.
As long as the response of demand to a change in price is proportionately less, MS increases profits by increasing price. However, this does not produce a socially desirable outcome. Microsoft's surplus, or benefit derived from sales, is bigger than if the price was $50, but the consumer's is much smaller. The total is less than if the price was $50. This situation can only be maintained in the long run due to the monopoly position of MS, and is called a market failure.
Therefore, the socially desirable thing is for the government to buy/regulate/whatever microsoft to sell their supernormal profits cheaper.
Wrong. (Score:4, Insightful)
When you're a monopoly, yes it is.
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:Wrong. (Score:4, Insightful)
And arbitrarily changing numbers... that's lying.
First, MS does not produce thousands of products. If you consider Office to be one product (although it actually consists of more than ten different apps) then by this logic the number is way less than one hundred.
Second, Windows servers (quite different from your home windows) are profitable.
SQL Server is profitable.
Exchange server is profitable.
Most of the other server apps (Biztalk, SharePoint etc.) are also profitable.
All the development tools are profitable.
MS Press is profitable.
Hardware (other than XBox) is profitable.
PC Games are profitable.
etc. etc. I don't remember all the different products.
You may dislike Microsoft, there's nothing wrong with that but lying is just plain childish and unethical.
Re:Wrong. (Score:4, Insightful)
Common Slashdot error: (Score:5, Funny)
...just because you know how to type in bold, it doesn't mean you're right.
Re:Wrong. (Score:5, Insightful)
What? What would the world be like if there were nested "if" statements? Wait. The world is like that. You just forgot.
There are qualifiers, checks, and balances for a reason. Otherwise there would be unchecked chaos.
This is tripe. "Lady Justice" is hardly blind to begin with. If you kill someone in self defense, is that the same as cold-blooded premeditated murder? The system sees circumstance as important. Being a monopoly is one of these circumstances.
Monopolies are an imbalance in the system. The system cannot be perfect, so it tries to correct for its imperfections. In a perfect system, there would never be a monopoly. However, an imperfect system with corrections is better than a blind system which refuses to acknowledge a problem.
Re:Wrong. (Score:3, Insightful)
Did you ever stop to think about that statement. Really think about it?
I have. Large monopolies like Microsoft scare the shit out of me. If they don't you, then you don't understand what Microsoft can do right now.
Ever wonder how fscked the world would be if that attitude were applied universally?
It's not an attitude. It's a fact, a law; and law is supposed to be applied universally. There are specific rules that deal with monopolies. And they are there for good reason. Some markets are natural monopolies, but it is wrong to allow monopolistic practices to spread to non monopoly markets; the consumer and the businesses in those markets, and all their employees always suffer. To the extent that the laws succeed in that goal- they are good law.
Re:Wrong. (Score:4, Insightful)
Did you ever stop to think about that statement. Really think about it?
Yes, I have. At first glance, it may make sense that government should treat all companies alike. However, monopolies are considered bad for capitalism by most economists. Inevitably monopolies form; markets which operate best with monopolies are called natural monopolies (like water, electricity, etc).
In order to keep markets competitive, governments put greater restrictions on monopolies. Your electric company can't move into the light bulb business and charge you more for electricity if you don't buy their light bulbs.
Whether or not the operating system and office suite markets naturally create monopolies is irrelevant. Economically speaking, it's bad for competition and a free market to have Microsoft use its monopoly power to enter new markets. Giving away free products, anticompetitive licensing agreements to OEMs, and simply underpricing other competition are examples of this.
So yes, the rules are different for a monopoly. This is good for every consumer and every firm except Microsoft.
Re:Collosal Bullshit (Score:3, Interesting)
This is so non-sequitur, I'm gonna burn a little karma and have a little fun, OK? ;-)
I see you referring to the color "blue". You correlate this closely with stocks in Japan performing ballet, but I don't think that is quite the conditional you wish to imply.
You are correct in referring to departments, and money, and how this has an impact on the environment. Why, just last week, someone I know took a fishing trip.
Is it because microsoft should get rid of all of their marketing staff developers support staff admin staff etc because they are a cost centre being supported by the sales team that you came to me?
Re:Sour Grapes, Troll (Score:3, Insightful)
No, but it becomes abusive when the company uses profits from one division to lower the prices of their products from another division in order to drive out competitors.
The US itself complains about this constantly when it comes to European steel imports and other goods. Maybe the solution to this problem is for the Europeans simply to impose hefty import duties on Microsoft's below-cost exports to the EU.
For the sake of comparison... (Score:4, Interesting)
Microsoft, OTOH, initially develops NT in partnership with IBM, so some of their costs are defrayed. Then they are the sole developer, but they have several releases, in addition to charging a per-seat license on for the server version, so they make up their development costs with each version. Now they are up to WinXP, which costs $300 for the professional version, which they are selling to 90% of the computer market. It should be obvious that MS is charging far, far more than they need to.
Also, keep in mind that most sales of Windows XP are preinstalled bundles on PC's, so who knows how much profit is made when you shell out the $300 for a shrink-wrapped copy.
I'm sorry, but when someone is making 85%+ margins AND shutting other companies out of entering the market, I don't know of a clearer definition of monopoly.
As a capitalist, I'd much rather see the market solve it's own problems. One way would certainly be for the government to seek out open source solutions as much as possible. Particularly the military; they already train their personnel on troubleshooting PC's, there's no reason they can't put more emphasis on Linux.
I just wouldn't want to see it issued as a directive that all departments must switch to Linux, because I'd hate to see Mac OS X get shut out.
Re:This really isn't a government issue (Score:3, Insightful)
Re:Anti-Microsoft Squad Strikes Again (Score:4)
Ximian, unlike microsoft, has to deal with market pressure. Microsoft is in such a position to not succept itself to market pressure as easily.
duh.
Re:some of this is a joke (Score:3, Funny)
I couldnt have put it better myself.
Re:This is good... Let's wait and see what happens (Score:3, Insightful)
Re:It is called Venture Capital (Score:4, Insightful)
Microsoft's playthings like XBox and WinCE will never be profitable.
Or to put it in words you understand:
ALL divisions at Microsoft are dependent on Windows and Office. With people refusing to upgrade and/or migrating to OpenOffice and Linux, ***** ALL ****** Microsoft products are endangered. - Sooner than you might think.
Expect the MSFT-shares to drop a bit in price over the next days. Shareholders don't like being lied to - they also don't like a company that is picking up losing ventures one after another (most recently and most serious is XBox. Sold about half as many units as Microsoft expected and promised - at a higher loss than expected.)
It's no coincidence that Bill Gates sells thousands of shares each week. He knows that even after all the beating the MSFT-stock received, it's still overpriced.
Microsoft's problem is that without happy shareholders, all their tax-stock-option loopholes don't work anymore. And without them, they would make losses - RIGHT NOW.
Always remember: The most profitable product Microsoft sells is not Windows and not Office, it's MSFT-stock.
Re:It is called Venture Capital (Score:3, Insightful)
How does such rubbish get a +5? NONE of us know whether or not they will be profitable, and people who actually study business (or who at least have a basic understanding of business, unlike many here at
Microsoft's problem is that without happy shareholders, all their tax-stock-option loopholes don't work anymore.
NEWSFLASH - Companies rely on happy shareholders. Please, got back to school.
Re:Bull shit (Score:3, Insightful)
Like Hell. Markup is NOT the same thing as profit.
Profit is equal to revenues minus the cost of manufacturing and minus the cost of sales admin and R&D. Markup is the increase percentage of cost of goods (i.e. manufacturing cost) to reach the selling price.
Most businesses have to have 80% markup to just break even. In the US the average business makes about 10% profit on a 80-100% markup.
Do you think I can buy a computer cable for $5 from Tiawan, mark it up and 100% and sell it to you for $10 and make a 100% profit? No friggin way. I still have to pay inventory carrying costs, rent on the warehouse, salaries and benefits of my bookkeeper and shipping clerks, taxes and so on.
What Microsoft has to do is sell their product at a price that is about 7 times what their manufacturing, sale, admin and R&D cost is to achieve an 86% profit. If we assume that their sales,admin,R&D costs are essentially the same as their manufacturing cost (typical for most companies), that means Microsoft's markup is 1400%, or fourteen times what the typical US business markup is.
Microsoft has been, and continues to be the most profitable (as a percentage of sales) large organization in the world. Major products like Windows with it's 86% profit exceed any other known large scale product in profitability. And that includes products like cocaine sold by drug cartels that only averages a 50% profit margin, and the patented pharmaceuticals that people on this site whine about so much.
THE ONLY CONCIEVEABLE WAY THAT MICROSOFT CAN MANTAIN SUCH PROFITS IS THROUGH PRICE GOUGING MADE POSSIBLE BY A MONOPOLY.
Your mistake (Score:4, Interesting)
Windows XP shares >90% of its code with
Good points! You should have stopped here.
Instead, you couldn't resist getting in a few useless jabs:
One more proof that these two websites are less and less appealing to people who have a brain and use it. It shouldn't be that hard to use your brain once in a while instead of spreading lies about your opponent, it actually might even be useful and intelligent.
What wasteful, unwise things for you to write! You could have made your point without diving down to invective. As is, your post looks like a troll and will probably be regarded by most as such. If you want to be convincing, you will do much better to present your facts without slandering your opponent. Hell, every opponent is a potential convert.
Re:It is NOT what economists call monopoly rents (Score:4, Insightful)
OK, call up Gateway and try to get them to sell you a computer without Windows pre-installed. Can't do it, can you? Or try running over to Best Buy and getting a computer without Windows on it.
Or try buying a Sony laptop without Windows installed on it.
The fact is that consumers do not and will not have a choice until the have the freedom to purchase any computer they want WITHOUT Windows installed on it.
Right now Microsoft has the market sewn up with these pre-installs to the point where consumers do not have a choice.
Re:It is NOT what economists call monopoly rents (Score:4, Interesting)
I wonder how many of Sony's customers actually call Sony up and ask for Linux to be pre-installed on their laptop... I'm sure there are a few, but not all that many. 'But Linux doesn't cost Sony anything! Why shouldn't they?' you cry.
Well, let's get back to reality now. If Sony wants to ship a desktop with Linux pre-installed, they've got to hire people to put together a pre-installed Linux distribution to use. People with experience building OEM Windows distributions aren't rare, and the tools to help this process are relatively common. Also, you've suddenly got to make sure all your hardware is completely supported in Linux. So you have to go out to your component suppliers.
So after you've done all this, you start selling pre-installed Linux on your computers... and suddenly somebody has a problem! Uh oh, I hope you have some people on hand for technical support! And you can't just outsource your technical support to a specialist company, like you can with Windows.
Let's face it. There simply isn't enough consumer interest to support pre-installed Linux on the desktop. Sure, you're going to save about $100 per computer (OEM license cost), but how many do you have to ship to make up for initial setup cost in the first place? The cost of the Windows license simply isn't a big enough on most computers being sold these days to make up for the pathetic level of general consumer interest (I don't consider the 0.5% of desktop users using Linux to be significant).
Now, the server market is different. Lots of people want Linux preinstalled on x86 servers and *gasp* I can buy it preinstalled! I've been able to for years! But there's appreciable demand, so that's no big surprise.
For the record, I use Debian GNU/Linux, and have for years. When I bought this computer (it's not worth my time to hunt down parts at OEM prices and build it myself), I just went to a local store, specced it out and asked for it without a Windows license. Easy as pie. But I didn't expect the guy running the store to preinstall Debian on it for me.