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".
This profit subsidizes the rest... (Score:2, Insightful)
I wonder (Score:1, Insightful)
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...)
Monopoly! (Score:5, Insightful)
uhhh... (Score:1, Insightful)
Sour Grapes, Troll (Score:2, Insightful)
Wouldn't want to abuse that monopoly position (Score:5, Insightful)
and if id ever got to the point (Score:5, Insightful)
Market (Score:2, Insightful)
Certainly not abuse! (Score:1, Insightful)
Re:You all could stand to learn some economics (Score:2, Insightful)
Re:You all could stand to learn some economics (Score:1, Insightful)
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 (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:This profit subsidizes the rest... (Score:3, Insightful)
Ahhh the XBox conquers (Score:1, Insightful)
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?
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: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: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:Sour Grapes, Troll (Score:5, Insightful)
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.
Anti-Microsoft Squad Strikes Again (Score:2, Insightful)
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 (Score:2, Insightful)
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.
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 $1000 in a few years (provided they will still be in the OS business). Actually, this issue is already covered in Judge Jackson's finding of fact in 1999. See this [albion.com].
Notice in particular the first sentence (emphasis mine):
And this is all from 1999! How much have they (not) changed in three years?
Re:uhhh... (Score:3, Insightful)
can you download windows XP, legally, for free?
i think it takes a whole different spin on things when a company can sell something for 150$ (and people purchase it) as well as give it away for free, and still be afloat.
k.
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:This really isn't a government issue (Score:3, Insightful)
SEC filings (Score:1, Insightful)
But to be realistic, MS could raise WinXP to $1000 a copy and it wouldn't decrease sales. It might even increase them because of perceived increased worth. As opposed to a certain bargain basement priced operating system, which is perceived to be worth what it costs, free.
Now, I don't understand American management's love affair with MS, just that it exists. It does tell me if management has this kind of bucks to throw around, there ain't no recession.
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: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:Sour Grapes, Troll (Score:2, Insightful)
They just simply pointed out that it was further proof that a monopoly exists...not that it was an abuse itself.
more specifically that they can artificially inflate prices and keep them high is an abuse of monopoly powers.
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: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.
You're missing the point. (Score:2, Insightful)
Re:This is good... Let's wait and see what happens (Score:3, Insightful)
Re:Microsoft's Corporate Customers Won't Like This (Score:1, Insightful)
Re:Bashing party! (Score:3, Insightful)
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: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: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.
Earnings versus income (Score:2, Insightful)
Re:Bashing party! (Score:5, Insightful)
Re:Wrong. (Score:2, Insightful)
Monopolies are bad for the economy.
It's not my opinion, it economic fact. Take econ101 somewhere and you'll learn about it.
Remove the blindfold from yourself. Learn about the way the world works. Not every law is a good law, but not every generalization can be applied universally.
Re:File formats! (Score:2, Insightful)
I don't agree with all of Microsofts efforts but I think this looks like a pretty good effort to work and play well with others. However, knowing Microsoft's history I think that this is likely a ploy to gain more market share.
M$ Tax (Score:2, 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: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: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.
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.
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: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.
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.
MS should be worried (Score:5, Insightful)
stopping your whining (Score:1, Insightful)
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: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?
Re:Monopoly! (Score:3, Insightful)
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.
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: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:Wrong. (Score:4, Insightful)
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:Profits? (Score:2, Insightful)
Its funny how the typical slashdotter throws all reason out the window when it comes to Microsoft.
First point, they are not loosing billions and billions of dollars. Microsoft is one of the most profitable companies out there. The fact of the matter is that every company out there has a cash cow product that funds the research and development of other products. If it were a requirement that everything that every company made was profitable from the first day they started making it, we would still be riding in horse and buggy carriages.
Why can't you see that the reason that Microsoft has such a dominant market presence today is because they make software that people want. When you sit and complain that the consumer does not have a choice you are only saying that the alternatives that you champion so much are the inferior products. There are Microsoft alternatives with every product they sell, and the reason they are successful is because 95% of all consumers choose Microsoft over the alternatives. This is no "monopoly rent". I guarantee that if they were charging more than people were willing to pay, they would no longer be the most popular software company out there.
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.
It *is* sold by Microsoft.. (Score:2, Insightful)
When the price of the stock goes down, it ends up either increasing the real money that MS has to pay, or increasing the number of stock options they pay. Of course, the latter means that actually everybody's stock is slightly devalued, it's just that the ponzi effects haven't shown up yet.
Should the stock start to drop quickly, I'm betting the amount it will drop will be staggering as all of those employee shares start flooding onto the market.
When the MS bubble finally bursts (and if the company never pays dividends, sooner or later it will, just like any ponzi scheme) it's going to be sheer hell on the economy.
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:Bashing party! (Score:2, Insightful)
4) The price M$ charges for its' Windows or Office products hasn't substantially changed over 10 years. If Win3.1 was $199 in 94 and if XP was $899 today then there would be a problem.
5) If M$ cut their prices in half, the next
6) Most companies have profitable divisions that subsidize other divisions that operate at a loss.
Now I don't like M$ very much myself, but there's alot of knee-jerk spindoctoring going on with some of these M$ articles, but they make for a good read.
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.
Re:and if id ever got to the point (Score:2, Insightful)
I don't buy distributions for the discs, manuals or support, I buy them to support Linux.
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.
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.
Re:Monopoly! (Score:2, Insightful)
Note that this describes neither the market for colas or computer operating systems. In the case of colas, it may be a case of what some economists call "monopolistic competition," in which the products are highly differentiated, so the producers are not forced to compete on price. (In this case, the differentation is a bit of a fraud, built by multi-million dollar advertising budgets designed to sell an image rather than a beverage.) If the buying public perceived all colas as identical, Coke would sell for no more than its store-brand equivalents.
Microsoft's case, however, is one of obvious monopoly. Note that this does not mean that Microsoft will set the price of Windows as high as it wishes. What it does mean is that Microsoft is able to set the price, rather than having the price determined by the market! Microsoft, if it acts intelligently, will set the price at such a point as it maximizes revenue (volume sold * price).
Which brings us to your question about the level of profit we should consider acceptable. From an economics point of view, only a "normal" rate of profit is acceptable -- anything above that is considered excess profit, and has no social justification. What is a normal rate of profit? It is the "opportunity cost of capital" -- the rate of return capital requires to locate and remain in an industry, rather than investing in, say, federal bonds (which carry no risk).
In a perfectly competitive marketplace, there is never any excess profit. This is because excess profit is a market signal for other firms to enter the market and drive the price down. However, in a market which is served by a monopoly, that monopoly is perfectly able to secure a rate of profit far above the normal rate. In other words, from the point of view of Smith's invisible hand, Microsoft's profit is in no way socially justifiable.
Really, if you're going to toss around the same tired old free market arguments, please consider making some attempt to actually learn the "science" behind your ideology. As it happens, I'm a socialist and think that neoclassical economics is largely nonsense, but I am actually taking the time to gain some working knowledge in it. You would do yourself a favor by doing the same.
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:I wonder (Score:1, Insightful)
I remember joining MSN after Windows 95 came out. I canceled the same month, but unless the 'new' MSN is some other division of Microsoft not related to the MSN that I subscribed to, I would have to say that MSN is about 7 years old.
Didn't CE come out with the Dreamcast? Wasn't that released in '97?
They are in startup mode only because Microsoft has two forms of businesses - Monopolies and Not-Quite Monopolies.
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.
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.
Re:Microsoft's profit, our loss... (Score:3, Insightful)
Re:Sour Grapes, Troll (Score:1, Insightful)
People have choices out there. Problem is they are free, and most people choose something they can pay for to provide peace of mind it's a good investment.
Really simple.
Comment removed (Score:4, Insightful)
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: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.
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.
Perils of quickie math (Score:3, Insightful)
However, that misses the point altogether of a margin: an 85% profit margin is always an 85% margin. 85% tells you what fraction of the take, and it's a big take, is characterized as profit. And 85%, especially given the VOLUME we're talking here, is staggering. 85% suggests you've either got a product that it unusual and special and hot and patented or hard to imitate, or that something fishy is going on.
You almost want to ask, why don't they spin off the Windows division? Well, we know that the Windows division bankrolls other, future plans of the Microsoft Corporation as it casts about trying to provide for its ongoing viability.
As for the relevance of monopoly, easy, it raises the highest price that the market will tolerate by imposing illegal constraints on the market finding something better. It's the essential reason that a monopoly is desirable. Think of it as getting a higher price from your customer with a handshake and a gun than a handshake alone. Simple as that, and just as illegal.
Re:Missing Lynx? I'm at a loss... (Score:2, Insightful)
big fucking deal (Score:3, Insightful)
I happen to know another company with a negative cash flow in most divisions. Actually, all divisions. It's VA Linux, and they're burning up money (from VCs and the IPO). Does that make them evil? Nope. Capitalism is about investing money (and taking a loss here and now) in the hopes of achieving profits in the future. It cost a lot of money to develop SourceForge (and all those star wars ripoff ads!), but now that it's developed, maybe they'll be able to sell it for large amounts of money.
Why is it different for MS? Because they don't need to seek outside VCs or do an IPO to create MSN or MSNBC or XBox? Or because someone has a hard on for them?
Re:This profit subsidizes the rest... (Score:3, Insightful)
You and what other companies?
Maybe Atari or Neo Geo or Nec (TurboGrafx) or 3DO or Amiga or Indrema... or everyone else. [google.com]
Re:Monopoly (Score:2, Insightful)
In terms of Perfect Competition, Price = Marginal Cost. (P = MC)
In terms of Monopoly pricing, Marginal Revenue (MR) = Marginal Cost (MC). Solve for Quantity (Q*), and plug that into Price (P).
Price cannot equal Marginal Revenue as they are two different curves. For example:
if P = 100 - 2Q
Total Revenue (TR) = P*Q
TR = (100 - 2Q)(Q)
TR = 100Q - 2Q^2
MR = dTR/dQ
MR = 100 - 4Q
Now, in order practice price discrimination the monopolist must (1) rule out arbitrage and (2) be able to classify customers.
To maximize profits the monopolist should increase the price paid by customers with an inelastic demand and decrease the price paid by customers with an elastic demand.
Price discrimination will increase profits but unit sales are unaffected.
Re:I wonder (Score:2, Insightful)
How can competitors fight back when Microsoft can continue to fund money losing products until the end of time? It pretty much means that the competition has to run twice as fast to win the race, and if they stumble, they lose.
Attacking them in their core markets is the only way to go. OpenOffice needs to continue to improve, as does Linux. The loss of the Windows/Office revenues would be very hard on Microsoft.
Re:Monopoly! (Score:3, Insightful)
Monopoly is not the point (Score:3, Insightful)
Homework assignment: go read the complete trial history of 7 major monopoly trials. After that, I'll listen to your opinions about how illegal Microsoft is. Until then, don't take it upon yourself to determine how illegal and evil Microsoft is.
Microsoft has done something that no other industry could do: provide a platform compelling enough to allow it to continue to make 85% profit margins even in the face of fairly strong competition being given away for free. People want/need/think they need Windows and Office. And maybe they don't just get it because they are ignorant masses. Perhaps they get it because it provides some things that nothing else can.
First, it is pretty tough to say exactly what it cost to produce Windows. We can see how much Bill spent on employees in the Windows division last year versus the profits that Windows sales brought. But Last Year's work on Windows isn't what made people want to make Last Year's Windows purchases. It was the work of years of figuring out how to make Windows valuable. A lot of this was research (which loses money). Some of this is peripheral applications (which lose money) -- without them available, nobody would want to buy Windows.
Now in doing this, Microsoft has stepped into controversial territory. Instead of under-pricing to take over a market, they are under-pricing to ensure the survival of another market. Those are different things. Predatory pricing is illegal, but the other hasn't been completely evaluated in court (AFAIK). Perhaps they are both wrong, perhaps only one. (Although it is likely that the real answer is that you can't really have one without the other, so maybe the question is moot.)
But I suggest that instead of yelling about how evil (aka very effective at doing what companies are supposed to do -- make a profit) and mean (aka looking out for themselves instead of their competition) Microsoft is, and how all Microsofties should go to jail, I would much rather focus on topics more grounded in reality:
What is Microsoft doing that Open Source isn't? How can we start doing this better without abandoning our values?
Should this practice of non-predatory undercutting be legal? It has definite advantages for some people (even not counting Microsoft), and definite disadvantages for some people. Is it different, as I asserted earlier, or is it the same as the normal predatory price undercutting?
What population is most hurt by this practice? Can Linux fill this need? Should we work to make this happen, or would it be better to chase the more mainstream population?
What do we need to do to shore up Linux's environment in the same way that Microsoft shores up Windows' environment?
The mindless repetition of whining and flaming of Microsoft every time any article about them comes out won't get anybody anywhere. Lets talk about something intelligent for a change. Please?
Thanks.
Re:MSFT's Unbreakable Monopoly (Score:2, Insightful)
Re:Where are the /. objectivists and capitalists? (Score:2, Insightful)
"One of the facts that this myth ignores is the role of the capital markets in a free economy. So long as investors are left free from government controls, they are free to bring an unlimited amount of new capital into any given industry. Thus, for example, a software company that has built its way up to a $400 billion market capitalization over a period of twenty years (Microsoft), may suddenly face, almost overnight, a $350 billion rival (AOL Time Warner)--thanks to the free capital markets that make such a merger possible."
Remind me, are AOL Time-Warner making Operating Systmens? Or are they making products to run on Microsofts OS's, I.e. complimenting rather than competing with Microsoft. And if Microsoft makes money off it's OS and Office exclusively, as shown in the
The answer, is no there isn't. Other companies do not have the commercial influence to threaten Microsofts posisiton in the OS market.
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:This profit subsidizes the rest... (Score:1, Insightful)
This is the standard in the industry, and unless Sony bites the big one, I don't think you'd ever have to worry about MS gaining a monopoly in video game consoles.
Not True? 3 of 7 were profitable (Score:2, Insightful)
Looking under Note 9 - Segement Info it looks like 3 of 7 segements are profitable, namely Client, Server Platforms and Info Worker. These three are by far the biggest.
The 4 non-profitable ones are obviously bets on the future (Business Solutions,MSN, CE/Mobility, Home and Entertainment).
One can make a case for Monopoly Rents, but it looks to me more like a classic business portfolio (Cash Cow/Dogs/Stars/Question Marks)
Just my 0.02
Re:The Slashdotter's Paradox (Score:3, Insightful)
A bicycle is a viable alternative to a car. Unless you work a long way from home or have to bring new furniture home, or have kids to drop off at daycare, or live someplace where it snows a lot.
So a bicylce is a viable alternative to a car, but there's lots of caveats.
Going naked is a viable alternative to clothing. Unless you're not a supermodel, or want to leave the house, or own lots of mirrors, or don't like to get arrested.
The Linux/Windows thing is not a true paradox. Linux is a viable alternative to Windows as long as your work doesn't require Windows, you don't want to play any of the games only available on Windows, you don't need any of the apps only available on Windows, and you're willing to spend a little time when things don't work right out of the box.
If you lost your car for some reason, you could probably get by: friends, bike, public transportation, taxi, rentals. If you lost Windows, you could probably get by - most Windows apps have an equivalent on Linux, and those that don't you could get from a friend's PC or at work or maybe on a Mac. We generally don't have to make the either/or choice, but we could if we just weren't so lazy/set in our ways.
Not a true paradox, but funny, I guess.
Re:Monopoly! (Score:2, Insightful)