07.28.09

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GNU/Linux is Shrinking Microsoft’s Margins

Posted in Finance, GNU/Linux, Microsoft at 3:46 am by Dr. Roy Schestowitz

“Before I turn and talk about how all of that then can amount to growth, I do want to talk a little bit about the fact that there are risks in our business. We have risks, people love to talk about them. Challenges: People talk about the challenge we have from open source software. Yes, we do, and we’re focused in on it.”

Steve Ballmer, 2005

Summary: The impact of GNU/Linux on Microsoft’s profitability becomes more evident

Microsoft’s stock collapsed after very disappointing results that were partly caused by Free software and GNU/Linux. All of these are issues that we addressed before and last night a reader brought to our attention this article about Microsoft’s shrinking margin.

CEO Ballmer is increasingly willing to accept lower margins in exchange for higher overall profits

Microsoft has long enjoyed Olympian profit margins, using its monopoly power to maintain prices on its software even in tough times. But now, amid a terrible downturn and rising competition, CEO Steven A. Ballmer is shifting to a scrappier approach. He is cutting prices on a variety of fronts, from flagship Windows and Office products to newfangled Internet services.

It is no secret that Microsoft would rather give Windows for free than lose market share to GNU/Linux. According to some, Microsoft would even pay people/companies to use Windows, but this is not a sustainable strategy.

“It’s easier for our software to compete with Linux when there’s piracy than when there’s not.”

Bill Gates

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8 Comments

  1. Needs Sunlight said,

    July 28, 2009 at 5:21 am

    Gravatar

    It’s already possible to buy MIPS and ARM based netbooks. That’s hardware inherently free of the M$ tax.

    You might scratch beneath the surface of the x86 market and find that a lot of home users and casual business users have dropped M$d cruft from their desktops.

    Robotron 2084 Reply:

    There is no Microsoft Tax. There is a great blog posting about this written by a guy who although primarily develops on Linux, he is NOT a zealot. You could learn something, but I doubt it.

    http://lucky13linux.wordpress.com/2009/04/13/there-is-no-microsoft-tax-except-on-lazy-twats/

    Needs Sunlight Reply:

    The M$ tax is still there for x86 machines, except to Apple. From time to time there are white boxes and linux-preinstalls. Those sell quickly and stocks last only a short while. Then, Asus being a typical example, the company mysteriously does a 180.

    http://www.freesoftwaremagazine.com/columns/the_microsoft_tax_revisited

    This page is dated, but still gives an overview of the scope of the problem.

    http://windowsrefund.info/survey/doku.php

    Show me machines with linux or any other non-M$ system pre-installed. Oh, you can’t, huh?

    zatoichi Reply:

    There’s nothing mysterious about Asus’ change, and I’d challenge the assertion that Linux-based devices from Asus “sold quickly”. Asus said they had a high return rate from users on Linux-based boxes, and a low overall demand.

    Maintain separate BoMs (know what a “BoM” is? Anyone?) is an expense and additional work for companies. If Asus decided not to stock netbooks with Linux pre-installed, there’s no “mystery” about it, it’s because the additional cost and inconvenience of doing so wasn’t justified by the sales.

    aeshna23 Reply:

    Robotron is to be thanked for reminding us of the hollowness of the people calling us “zealots.” He links to some angry person without a serious argument. And he says that angry person mostly develops Linux. If angry person does indeed develop Linux, I suggest he spends his time developing on a platform that he actually likes.

    Roy Schestowitz Reply:

    Robotron is to be thanked for reminding us of the hollowness of the people calling us “zealots.”

    “Robotron 2084″ is a nymshift of someone who has been ‘heckling’ (and that’s putting it gently) this Web site for years.

    eet Reply:

    This is interesting, Roy. Care to share your knowledge, or is it just inference as your usual vague accusations?

  2. zatoichi said,

    July 28, 2009 at 9:22 am

    Gravatar

    <B“But why would anyone expect Microsoft and its ilk to continue to court a community that ridicules and second-guesses its every attempt at perestroika? I know from conversations with several companies that they’re actually scared to engage the open-source community because the responses have been so intemperate and ideological.

    “I’m convinced that this element of the open-source community, vocal and sometimes vicious, is a minority. I’m equally convinced that we’d better off if this enemy within would spend more time analyzing its own behavior rather than shouting down the supposed “mudbloods” of open source.”
    Matt Asay

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