Microsoft Posts Record Earnings 528
sriram_2001 writes "Microsoft has just had a record quarter where their profits have doubled from the previous quarter. Total sales are at $10 billion, exceeding both internal and external expectations. Microsoft has attributed the rise in earnings to increased server sales (where *nix-based systems are supposed to be doing well) and more XBox units being sold. For a company that most Slashdotters would say is on the decline, Microsoft sure has weird financial results!" To put it in perspective, Microsoft's income is about the same as New York State receives in taxes - below California, and well above the other 48 states.
Server sales (Score:5, Insightful)
Maybe it's because more servers (both MS and !MS) have been sold this year so both were profitable...
Good for them (Score:2, Insightful)
This is probably one reason why Microsoft is increasing office space (a good hint at increased hiring if they're making room for thousands of extra workers).
When will people stop wishing for the failure of others and start wishing for the success of their choosing?
Historically, not that great though (Score:3, Insightful)
Maybe it's because ... (Score:2, Insightful)
Re:First Post? (Score:5, Insightful)
That many people still see that you have to use Microsoft Products or that alternatives aren't out there for certain products that are easy for your average joe 6 pack to use.
Alternatives are targeted at the tech savvy and are not marketed well enough. M$ is a marketing machine. Most of our folks have trouble programming a VCR clock. I bet it's very true.
licence fees (Score:3, Insightful)
One Time Boost (Score:5, Insightful)
It should also be said, that there's no Halo next quarter.
MSFT would love to make the claim that this is largely due to server software... but its Halo II... and that ain't happening again any time soon.
Unix migrations (Score:4, Insightful)
Re:Predictions? (Score:3, Insightful)
I think its just a "star". The reason we're talking about it is because it was a "small moon" 20 years ago, so its growth has been stunning.
But now its another company. Its earnings are good, but not wonderful. Its products are good, but not wonderful. Its growth is good, but not wonderful. (So the black-hole / supernova thing probably doesn't apply). What it does have insane amounts of is cash. So its also not a star that's going to run out of fuel any time soon.
Re:Historically, not that great though (Score:5, Insightful)
Re:Where is all the money coming from? (Score:3, Insightful)
It's not inexplicable... Microsoft started out by squashing competition in every arena they could until they were above and beyond the most dominant force in the computer industry.
They received a slap on the wrist from the Government and continue to dominate...
The reason that people continue to go with upgrades and new versions of software like Office is because they don't have a choice. If you want to interoperate in the business world today you do it via Microsoft products.
Re:One Time Boost (Score:5, Insightful)
Halo 2 has sold 6 million units at 50 dollars each. If you count wholesale againt "total sales" figures, that adds 180 million dollars. Considering Microsoft reaps publisher, producer, and licencing margins on each one sold, Halo 2 accounts for *all* 90 million in profit the Microsoft games division made last quarter.
Still, that's nothing compared to the 2.5 billion in profit from their desktop division.
Re:Where is all the money coming from? (Score:2, Insightful)
"Oh my god, my company has to buy new fleet vehicles every couple years because the old ones just aren't as good anymore! GM's just one big organized crime syndicate!"
Re:Old earnings? (Score:4, Insightful)
There's one big difference. In each of those cases, Microsoft was there to burst the bubble and take away the market share. This time around there is no "other Microsoft".
Don't get me wrong, there's going to be competition. OSS continues to make strides in usability (Firefox), and Apple is finally selling a cheap computer. But I think, by best estimates, Apple/OSS could only take away 20% of MS's market share on the OS level.
When Novell collapsed, it was because Microsoft was rising. Same with IBM (fortunately for them, they reshaped their business from software to services). No one is going to grind Microsoft into the dirt anytime soon.
Re:That's nice... (Score:2, Insightful)
The increase in server sales is probably sustainable because servers are being deployed in environments where they used not to exist. For example, small businesses used to shut down all the PCs for the nigth. Now they run their own web servers or email and file servers for remote access. I guess it is the broadband Internet connections that make the difference. You first try it on your old PC, then become dependent in it, and finally shell out the money for real server OS and/or hardware.
I have first-hand experience of this because I've just been installing a Windows 2003 server at home, and my housemate has just ordered a new Linux server. It is just so much more convenient to have your data always online.
Comment removed (Score:4, Insightful)
Re:Where is all the money coming from? (Score:2, Insightful)
I'm no MS fanboy [openvms.org], but repeating misinformation won't get you anywhere. Besides, someone who is actually in IT will tell you that most of the OS money is spent on server licenses and CALs, and the difference between 2000 Server and 2003 Server is even bigger than that between the desktop versions. A fancy UI doesn't get you far on a server (and it's turned off by default in 2003). Anti-MS zealots keep focusing on the desktop Windows, which tells me that most of them are probably working in retail during the day and playing "'blog-master" at night.
Re: Linux not yet good enough! (Score:2, Insightful)
However, the server component does indicate that
the lock-in aspect is incredibly important. This indicates that even for supposedly "Tech-savy" users, M$ produces a product that many view as good enough.
For those who believe that M$ profits need to begin to shrink to enhance world freedom, what this means is that 1) Linux has to get relatively much better at a technical level and 2) that Linux/GNU needs to make it clear to M$ users that they are at a disadvantage from a user perspective. Linux/GNU needs to identify and target specific classes of M$ users and demonstrate just what a competitive disadvantage means. If they can't of course, this may mean that some might have to admit that at least from a business perspective M$ has a better product.
Hype and pomposity will unlikely change the situation. Only concerted action and a redoubling of effort on the part of the Linux/GNU/FOSS community will change things.
Stop hyping and and blabbering about how great Linux/GNU/FOSS is relative to M$ in upity-tones and use that energy to do things that will make the community more attractive to the average Joe (and particularly average Joe businessman), who hasn't figured out that Linux/GNU/FOSS is the better deal for himself and for society. Its time to work more constructively with other members of our Linux/GNU/FOSS community.
Here's a novel idea... (Score:2, Insightful)
"Weird financial results" (Score:5, Insightful)
In DEC's case, the influx of workstation-class machinery caused a weakening of the mini market. This weakening killed off all but the strongest mini maker (DEC). Customers fleeing from failing makers split themselves between DEC and the new workstation vendors, thus causing a boost in DEC's sales right before the crash of the whole mini market -- DEC peaked amongst the carnage of their market, then crashed spectacularly.
Sun's case was a repeat of the behavior. Sun's market had migrated from workstations to servers from the late 80s through the mid 90s. By the mid 90s, however, we were already seeing a market shift towards PCs acting as servers. As the server vendors' market weakened (still prior to the Internet boom) we saw diminishing workstation/server sales for many companies in that sector (e.g. HP, SGI). Meanwhile Sun's sales skyrocketed, again attributable to a split in the market where some of the people leaving failing vendors went to Sun.
Sun would have had a crash in the 1999 timeframe if it weren't for the internet boom, which dramatically increased demand for large servers. When the boom ended, however, so did Sun's fortunes -- very fast. You can see in Dell's sales where the market went.
Microsoft has been benefitting from the failing of the server vendors, same as Sun. (Though, really, the biggest winner in this is Dell.) If this were a normal hardware-only migration Microsoft would rapidly capture upwards of 80% of he market and be dominant until the next hardware shift. But it's not normal because this is the first transition where the software is decoupled from the hardware.
Microsoft should have won by default, with customers shifting from server-class systems to PCs as customers went with the default option of Windows servers. And, in fact, Microsoft did extremely well for the first several years of the transition when there really wasn't much competition in the PC space.
Linux has thrown a huge wrench in the works. It's maturing very nicely and offers the huge win over Windows in that it's both cheaper for licenses and especially for migration.
If there's any one thing we can count on in this industry it's that the cheapest thing that gets the job done wins (which I've been saying so long now I call it Jim's Law). Until Linux came along the cheapest thing was Windows servers. Now it's not. The market impact of that is going to be phenomenal.
In a typical market transition you can expect more or less equal boosting of the various competitors in the market as people flee dying companies. But in a typical market transition there is not much price difference between the competitors -- usually within 10%, as everyone attempts to maximize the market opportunity.
Linux turns that on its head by offering a scale of prices starting at zero (no support) through prices that are more or less competitive with Microsoft's offerings (full support). That gives Linux a significant market advantage.
I expect we'll see a major market move towards mid-priced systems (some support, not "enterprise class" support, call it the $500 price point). Microsoft is trying hard to push for higher prices in that market just as Linux is depressing them.
If things continue the way they are going I would expect Microsoft to peak in the next one to three years at perhaps 65% of the market (by units) as the migration from server-class systems to PCs-as-servers completes, and then fall over the following five years to about 30% of the market as people migrate to more cost-effective Linux solutions.
But Microsoft won't take this laying down, they'll start reducing prices to match those of the midrange Linux products (more on that in a minute), to whatever degree they can afford. As such I think we're going to see the products come very close to price parity and we'll see Windows stabilize at 40-45% market share with
Re:Where is all the money coming from? (Score:4, Insightful)
Regardless of the existence of acceptable replacements, there is still a belief by senior management that Microsoft is like the government: you avoid giving them as much money as you can get away with but sooner or later you have to pay them. It's literally factored in as part of the rules if you want to be in the game.
Now, the good news is the times, they are a changin'...
Comparison to tax revenue? (Score:5, Insightful)
Everyone who paid Microsoft a dime did so voluntarily, while people who paid the state of New York did so to stay out of jail.
Broadband= MS Profit (Score:2, Insightful)
As more and more people get online, more servers will be required, and with anti-Linux propaganda at the ready, Microsoft can take advantage of small business sans IT.
(http://www.microsoft.com/windowsserversyste
That being said, I'm sure Linux groups (Red Hat, etc.) have sold more servers also.
As previously mentioned, more and more computers are being sold. The vast majority are dell-whorish mass-produced Windows XP computers.
Case in point, I'm at my school library using brand new IBMs running Windows XP. As long as schools, libraries, individual users, etc, continue to buy desktops, Microsofts profits will continue to rise.
On a side note, the computer next to me just crashed.
Re:Unix migrations (Score:3, Insightful)
From where I'm sitting, this isn't true. Over the past four years, I've seen more and more proprietary hardware being replaced by commodity hardware. This is happening for various 'nix strongholds - from servers to engineering workstations. And while many folks will view this as a Windows vs. Unix issue... it's not. It's all about the hardware. The commodity hardware is cheaper and for these applications, just as capable. Windows just comes along for the ride.
The real reason why they posted gains (Score:2, Insightful)
Microsoft touts this as "high demand" for their server platform, when in reality, its a strong-arm move to keep their customers locked in to their platform, support and licensing model.
Most enterprises likely had little choice but to upgrade. It was the easier choice in my company, despite my loathing of the Microsoft business model (NOTE: I said *easier* choice, not the *right* choice). It would be far more difficult to migrate to a non-Microsoft platform when there are well known dependencies on MS technology.
Unfortunatly, the closest thing related to an IT architecture strategy around my company looks remarkably like the Microsoft technology roadmap.
I need a new job...
Re:No matter ... (Score:3, Insightful)
Re:"Weird financial results" (Score:3, Insightful)
I agree with most of your analysis, but not with the above.
Windows marketshare will not stabilize at any percentage lower than 80% [of the PC-centric market (=x86 and AMD64), not the whole computing market] because Windows needs domination to be viable. The Linux community can write most drivers for hardware, Microsoft is dependent on hardware vendors to write drivers for Windows, they just can't do it themselves.
Similar effects with software and support: The only real advantage Windows offers is a larger/better software library which is a result of their domination.
Without domination, Windows loses all it's advantages - but the disadvantages remain.
Therefore once Windows loses domination, it's fate is doomed and will become legacy software because it offers no advantages anymore.
But of course just because Windows is doomed, doesn't mean Microsoft is doomed. They have just too much money to be doomed...