EditorsAbout the SiteComes vs. MicrosoftUsing This Web SiteSite ArchivesCredibility IndexOOXMLOpenDocumentPatentsNovellNews DigestSite NewsRSS

10.25.10

Windows Profit Declines Sharply Because of Competition From GNU/Linux

Posted in Finance, GNU/Linux, Microsoft, Windows at 4:02 pm by Dr. Roy Schestowitz

Old building

Summary: Slowly but surely, Free software breaks Windows and other Microsoft platforms by lowering their market value and thus hurting Microsoft’s cashflow

ONE of our sceptical readers has raised an important matter in IRC yesterday. By looking back at some numbers he claims to have found more proof that Vista 7 does not succeed in the marketplace, contrary to these ludicrous claims that “Windows 7 might be a massive commercial success” (utter BS from Engadget, no offence intended). We’ll get to the pertinent details in a moment, not before pointing out that our informant from Sweden, Mikko, claims based on this article that “[S]ilverlight on the web is dead [...] Ballmer states that Silverlight is now pretty much strictly a client, non-cross platform thing, while explicitly stating that when it comes to doing something universal, “the world’s gone HTML5″.” So, we were right about Silverlight all along [1, 2, 3, 4], but that’s a separate story.

Mikko says he “thinks that there’s only bad journalism on Engadget” and we too wrote about the subject. Microsoft even gave this publication an expensive new laptop with Vista 7 (pre-beta) preinstalled so that it can praise Vista 7 before anyone else gets to see it. It’s an exercise of PR.

Windows undoubtedly has a margins problem. Mainstream publications that we cited recently say it clearly as it’s not hard to see. And looking at the source our reader cites, there is this MSFT analysis (Q1 of 2010) and one particular image that says it all. It’s all big minuses for Microsoft’s cash cows too.

Our reader responded by saying: “Record numbers of sales but 52% decline in income? Wow!

“If Microsoft’s sales have been flat of declining, it is no wonder they have gone from virtual dominance to 68% of all units today. 68% is a Vista 7 channel stuffing number, and the actual number is probably greater than that. That is, more than 32% of desktop computers are shipped without Windows…”

As we have shown before, Windows profits declined over the years. Profit fell by more than half based on the above, but income aside, revenue is down 39% too for Windows. That’s pretty shocking unless there’s a snag to be taken into account.

Our reader summarised by saying that “you can’t see the reports, sadly but the SEC will serve them to you… I was more interested in finding the number of licenses Microsoft has sold as a fraction of world PC shipments. Both are slippery numbers, with IDC providing most of the published PC shipment figures to Microsoft boosters and few hits on license numbers.” GNU/Linux is one cause of the stated declines. Microsoft is forced to lower prices to remain competitive. This may help explain the FUD attacks we’ve been seeing recently. One talking point is about GNU/Linux being “fragmented”, which is basically a negative word for “diverse”. “”Fragmented” is a proprietary spectacles view,” explained Groklaw some days ago in relation to Android, and “[p]eople say that about GNU/Linux too. But what they miss is this: you can do whatever you want. That is a wonderful feeling, and it leads to superfast development, not to mention a lot of fun.”

Share this post: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Digg
  • del.icio.us
  • Reddit
  • co.mments
  • DZone
  • email
  • Google Bookmarks
  • LinkedIn
  • NewsVine
  • Print
  • Technorati
  • TwitThis
  • Facebook

If you liked this post, consider subscribing to the RSS feed or join us now at the IRC channels.

Pages that cross-reference this one

11 Comments

  1. lightpriest said,

    October 26, 2010 at 4:20 am

    Gravatar

    Every Linux distro allows you to install a different kernel version or compile one of your own so you could add/remove support or even optimize it for your own needs.
    With package managers and different repositories you have the ability to install an older/newer version of some software if current is buggy or lack some features.
    You can even run the same software with different versions using chroot, if dependency is a problem.

    On Windows, you cannot replace the “Explorer” (shell), you cannot replace “Gena” (the login manager), but still – there are 4 major versions of Windows splitted amongst different SPs and each with its own problems/bugs. Different MSOffice versions sometimes don’t match each other making documents look funny. Different IIS versions have weird bugs, not to mention performance issues.
    Some laptop OEMs build drivers only for Vista/7, making it impossible to use XP with that laptop.

    If anything’s true about fragmentation is that every software has it.
    MS users suffer more from it. If you have a problem with a certain version of Windows you either need to pay for an upgrade, which breaks other stuff, wait for the company to build a fixed version or don’t use the feature you wanted at all.
    If that same problem occures on Linux, at worst you chroot.

    Fragmentation on Linux is an advantage, it was created that way. Fragmentation on Windows is how they do business.

    twitter Reply:

    Fragmentation, as you have noticed, is a non free software problem. Microsoft successfully labled non free Unix “fragmented” and they would like to project this on gnu/linux, bsd and other free software. They might have a point with Android because Google did not use a strong copy left license like GPL3 that would prevent Tivoisation and other non free monkey shines. Anyone can see that there is no such problem with gnu/linux because all of the same free software comes with ever distribution, with a few interesting exceptions that others have not picked up yet. Skype demonstates that it is easy enough to make non free software for gnu/linux distributions but the user is left helpless and dependent on Skype. All of these problems and more exist to a worse extent on Windows, of course. The issue is a typical Microsoft troll which inverts reality for the ignorant.

    It is better to talk about the fundamental issues of software freedom which clear the air quickly. More freedom and fewer restrictions are obviously better for everyone. “Fragmentation” does not exist where people are free to share. Most other software problems boil down to people being uncooperative and abusive towards their neighbors.

    Dr. Roy Schestowitz Reply:

    In UNIX, things are typically built upon accepted standards (not vendors), so the notion of “fragmentation” does not quite apply. The modular pieces interact quite nicely.

    twitter Reply:

    Irix, HPUX, AIX, Solaris, SCO, Next and others did incorporate some common and accepted standards but each owner had their selfish pieces that made “open” difficult. Irix had a journaling file system, for example but others did not. Free software has recreated the nice pieces of each and brought them together where they can all be enjoyed at once. I’m no expert in ancient Unix, but differences in C libraries made it difficult to port some work from Solaris to gnu/linux for me. Had all of the owners shared from the start, their hardware would now dominate the computing landscape. As things went, the survivors lost both their independent hardware and software efforts and now bow down before Intel and Microsoft. They were divided and annihilated.

  2. TemporalBeing said,

    October 26, 2010 at 12:12 pm

    Gravatar

    It’s coming to the end-game for Microsoft.

    Back when Windows 9x/Me was released, an upgrade cost $90USD, and the full version (everything!) was $199 at most. WinXP increased that slightly; I think upgrades were $120-130 range, but the full version (Pro) was still only about $199. With Vista, Microsoft more than doubled the cost. All of a sudden upgrades were $199, and the full version was $399! An inflated value that they kept for Win7, only they added the Family Pack (3-5 licenses) for a little more than that $199 upgrade price. Still, not really much of a deal.

    At least with Office they were smart enough not to change the price too significantly; but it’s still pricey; and Microsoft relies Office to drive sales of Windows. So as people and organizations have started moving off of Office, they now find themselves able to move off of Windows as well, or at least in a better position to do so.

    So, I expect that we are at the beginning of the exponential curve downwards of ousting Microsoft from the PC business. The same wave that pushed them to market dominance is now going to crush them.

    Dr. Roy Schestowitz Reply:

    They are moving into vapourware mode again.

  3. twitter said,

    October 28, 2010 at 10:44 pm

    Gravatar

    Vista 7 Failure! Despite wild raves by Microsoft boosters, first quarter numbers are not good for Microsoft. Barrons has a concise summary, with some caveats about deferred income and jubilation but little perspective.

    [16.2 billion in revenue] up 25% from a year ago. Operating income was $7.12 billion, up 59%; net income was $5.41 billion, up 51%; EPS was up 55%. Year ago period results included the deferral of $1.47 billion of revenue related to Windows 7 upgrades; adjusted for that factor, revenue was up 13% and operating income was up 20%, while net income was up 16% and EPS rose 19%.

    Sounds great, right? Not when compared to 2009 [2], the tail end of Vista failure. In 2009, the company had income of about 7 billion. So, there is little change from where Vista left them in 2009. In fact, the company is probably worse off because they managed to channel stuff 240 million Vista 7 licenses recently. Not much should be expected beyond that spurt.

    Predictably, Microsoft bills the deferral roller coaster as explosive growth. In this article, for example, claims “During Q1 FY10, before Windows 7 was released…” which is not true. Microsoft was already selling licenses for the new OS and had channel stuffed enough of them to cause a big dip when the revenue was “deferred”. A year later, we have some more channel stuffing billed as actual sales to make an apparent rise. The two year numbers tell the story more clearly but Microsoft boosters pretend to be unable to remember the numbers. Goldfish might do better.

    twitter Reply:

    Tech Crunch points out that Apple had $4 billion more revenue than Microsoft did. If we believe Microsoft when they tell us Windows 7 has been very successfull, the best selling OS EVAR, we have to conclude that Windows success makes no difference. Success or failure, Windows 7, just like Vista, has not made a bottom line difference to Microsoft.

  4. twitter said,

    October 30, 2010 at 1:47 pm

    Gravatar

    Pogson’s figures gave Microsoft more credit than they deserved because he took the company’s word. Microsoft claimed that 240 million coppies of Vista 7 had been shipped/sold. Pogson took that number and divided it by the number of computers shipped/sold in the year which was 350 million. Microsoft’s quarterly report claims only 150 million coppies. The discrepancy most likely comes from the fact that Microsoft pulled a Vista capable scam, promising free “upgrades”, long before they officially released Windows 7. The confusion is intentional, but they lied less to the SEC than they did to everyone else. 150/350 million is far less than Pogson gave the company credit for. XP has made up the majority of business purchases, because business has choices that normal people don’t, but it is probably fair to say that less than 60% of computers shipped with Windows last year.

    Poor Steve Ballmer only got a $670,000 bonus because results were so bad and even people at Information Week realize that Microsoft might not be around in five years.

    twitter Reply:

    The report referenced is actually a proxy report which has executive compensation and number of shares owned.

    Dr. Roy Schestowitz Reply:

    The bonus matters a lot less than Ballmer’s shares in the company. But a decline is symbolic. Ron Hovsepian’s bonus (Novell CEO) is almost 10 times that of Ballmer.

What Else is New


  1. Links 14/9/2014: Android-based Watches Earn Optimism

    Links for the day



  2. Links 14/9/2014: Eucalyptus Devoured

    Links for the day



  3. Links 11/9/2014: Linux Toilet Project, Linux-Based Wheelchair Project

    Links for the day



  4. Links 10/9/2014: Brian Stevens in Google, Ubuntu 14.10 Expectations

    Links for the day



  5. Links 9/9/2014: Hating/Loving Linux, Android Aplenty

    Links for the day



  6. Links 8/9/2014: Linux 3.17 RC 4, Switzerland Welcoming Snowden

    Links for the day



  7. Suspicion of High-Level Corruption at the European Patent Office (EPO): Part I

    The European Patent Office (EPO) Vice-President has a background of corruption and his appointment to the EPO too is believed to be reliant on systemic corruption



  8. Links 6/9/2014: Core OS at DigitalOcean, Women in Xorg

    Links for the day



  9. Software Patents 'Quality' Debated in Courts, Microsoft's Biggest Patent Troll Still a Chronic Liar

    Intellectual Ventures, Microsoft's and Bill Gates' largest patent proxy, continues to spread lies about its motivations, claiming that patent assessment is among the goals when in fact only the courts and patent offices do this



  10. New Article Explains How Bill Gates Prevents Schools From Moving to GNU/Linux and Free Software

    A new article from Al Jazeera provides details about the role of so-called 'charities' of billionaires inside school systems



  11. Microsoft Sued for Large-scale Copyright Abuses

    Microsoft reveals its disregard for copyright law which it loves so much to wield as a weapon against its competition and clients



  12. Links 5/9/2014: New WordPress, Systemd Debate Continues

    Links for the day



  13. 'Embrace and Extend' at Microsoft: The New Generation

    Some of the latest examples of Microsoft's predatory acts against Free software and against competition in general, disguised as acts of friendliness



  14. Bill Gates' God Complex: Common Core a One-Man Campaign of Greed and Control

    The push for Common Core is overwhelmingly dominated by Bill Gates, who intimidates and even resorts to retribution against critics while bribing those who help him accomplish the goal of privatised (for his private profit) indoctrination in US schools



  15. Bill Gates Investments Harm the World, Not Improve the World, Based on New Exclusive Piece of Investigative Journalism at The Nation

    The Gates Foundation's profiteering efforts and lack of ethics outlined in a new report that many sites around the Web find fascinating and mostly irrefutable



  16. Links 3/9/2014: Android Gadgets, New Tails OS

    Links for the day



  17. Linus Torvalds DebConf Talk

    Torvalds' latest talk which got media attention earlier this month



  18. Microsoft Should Not be Considered Too Big to Jail

    Microsoft continues to use dumping as a strategy which revolves around starving the competition, not beating the competition



  19. Pro-Software Patents Voices Finally Acknowledge the Demise of Software Patents in the United States

    A milestone is reached as even the most zealous supporters of patents on algorithms (or computer-implemented inventions, or software patents) are admitting that the era of software patents may be over



  20. New Lies About Microsoft 'Privacy' and New FUD Against the GPL Comes From 'Former' Microsoft Staff at Black Duck

    More AstroTurfing by sites that are run by Microsoft MVPs and firms which were created by people from Microsoft



  21. Links 2/9/2014: GNU/Linux in BBC, Calls Against systemd

    Links for the day



  22. Links 1/9/2014: Poettering on systemd, ITNews on DBMSs

    Links for the day



  23. Moving Away From Windows to GNU/Linux and the Abandonment of Windows as the Modest Proposal These Days

    Morale of GNU/Linux and an embrace of GNU/Linux is very high, despite recent propaganda from Microsoft MVPs and boosters (primarily security-themed and Munich-themed FUD)



  24. Korean Press Slams Microsoft Over Patent Extortion Against Linux/Android as New Abuses Resurface

    Harsh words from the national press of South Korea as Nokia's role in Microsoft's anti-Linux tactics becomes more apparent



  25. More Good News About Patents and Their Demise in the United States

    A roundup of news about software patents and patent trolls in the land where these thrive



  26. Links 31/8/2014: Linux 3.12.27, Akademy 2014

    Links for the day



  27. Links 30/8/2014: Jailhouse 0.1, *buntu 14.10 Beta

    Links for the day



  28. Links 28/8/2014: Many New Games, CTO of Red Hat Steps Down

    Links for the day



  29. We Are Gradually Winning the Battle Against Software Patents

    The once-elusive war on software patents is finally leading to some breakthrough and even the Federal Circuit reinforces the trend of software patents' demise



  30. Free/Open Source Software (FOSS) Companies Versus FOSS Moles (VMware, Sonatype, Xamarin)

    A look at three entities which pretend to be pro-FOSS but are actually FOSS-hostile and very much determined to replace FOSS with proprietary software


CoPilotCo

RSS 64x64RSS Feed: subscribe to the RSS feed for regular updates

Home iconSite Wiki: You can improve this site by helping the extension of the site's content

Home iconSite Home: Background about the site and some key features in the front page

Chat iconIRC Channel: Come and chat with us in real time

CoPilotCo

Recent Posts