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01.29.11

In Search of a New Cash Cow and Common Carrier

Posted in Finance, Microsoft at 11:54 pm by Dr. Roy Schestowitz

Summary: As Windows figures sink like a rock (despite cheating) Microsoft must find new lock-in methods such as SharePoint

EARLIER today we showed that Microsoft possibly fakes its financial results again. Putting that all aside, Business Insider reports that Microsoft still loses over $2 billion each year in the online business alone:

Every quarter Microsoft reports earnings, and every quarter it reports a massive loss in its online operations. Today it reported a $543 million loss for its December quarter.

When Microsoft reported the numbers (they had been leaked beforehand because the site got hacked) the stock responded negatively and sank to the lowest level in almost 2 months. It turns out that, given the demise of Windows, it is reasonable to believe that other products which depend on Windows as a common carrier (e.g. Office, SharePoint) are bound to suffer too and speaking of SharePoint, there is new criticism of the cost of this pile of uninvited lock-in.

Microsoft estimates that you the customer will spend a total of $6.2 Billion on services related to SharePoint in 2011 (see their partner pitch). According to my rough estimate, you can add $1.7 Billion in 2011 SharePoint license revenue on top. This for a product that many sales folk continue to tout as low cost, and sometimes even as free.

That’s a huge amount of money by anyone’s lights, and so it’s no wonder SharePoint has been subject to so much hype. To get a feel for just how much money we’re talking about here, I assembled the chart below. According to Goldman Sachs data more than 50 countries have a GDP (Gross Domestic Product) less than what the world spends on SharePoint.

Microsoft has devised all sorts of new lock-ins, but unless enough businesses swallow the bait, this is not a viable long-term strategy.

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