It's the margins

Summary: Why GNU/Linux is by all means Microsoft's #1 competitor, as Microsoft admits repeatedly

FOR MICROSOFT to sell Windows for just $5 apiece is not a sustainable business model; when it comes to Vista 7, Microsoft intends to offer it almost gratis, but only a crippled version of it. Even Intel has publicly claimed this strategy to be misguided.

Intel's concerns are actually closely related to Microsoft's. ARM and Linux go hand in hand and some days ago we found reports about ABI on GNU/Linux and ARM.

ABI Research reports that a downturning economy may be advantageous for inexpensive netbook computers. In 2008, 75% of netbooks ran Microsoft Windows XP, but ABI Research predicts that in 2012, netbooks running Linux-based and mobile operating systems will outnumber those running Microsoft operating systems.

Here is the original.

All of this is not particularly new or surprising, but Microsoft uses NPD to spread lies. It is part of the following strategy from Microsoft:

"Ideally, use of the competing technology becomes associated with mental deficiency, as in, "he believes in Santa Claus, the Easter Bunny, and OS/2." Just keep rubbing it in, via the press, analysts, newsgroups, whatever. Make the complete failure of the competition's technology part of the mythology of the computer industry. We want to place selection pressure on those companies and individuals that show a genetic weakness for competitors' technologies, to make the industry increasingly resistant to such unhealthy strains, over time."

--Microsoft, internal document [PDF]

The reality of this matter is that the news is not about market share, either. It's about Microsoft compromising profit (not just in the short term) because anything that runs GNU/Linux is Microsoft's lost revenue anyway.

One of Microsoft's biggest fans, who makes a living from consulting/writing in that area, is admitting that "netbooks are destroying the laptop market" for Microsoft.

Netbooks are a cheap narcotic. They bring Windows OEMs a brief sales high, while laying their margins low. Microsoft and its Windows PC partners must get back to basic business fundamentals before netbooks destroy the lifeblood of the laptop market: margins.

Even Microsoft's pseudo-journalists are now echoing this concern.

So, will it impact Microsoft or will it not? Well, it most certainly will. It already does.

Ahead of Microsoft's next quarterly report it got a slap on the wrist. As Market Watch put it, "Microsoft expected to post sharp drop in profit."

Redmond, Wash.-based Microsoft's quarterly results are generally expected to have been undercut by growing demand for cheaper computers with relatively low-cost software.

Look what happened shortly afterwards (on Friday):

Microsoft shares dip after analyst cuts forecast

Microsoft shares stumbled Friday after a Thomas Weisel analyst cast some doubt on Wall Street's earnings and sales forecast for the company's fiscal third quarter.

Microsoft has done badly for several consecutive quarters, but its aggressive buybacks and risky financial strategy can truly deceive those who just watch the stock price.

So what will it be next for Microsoft? Other than suing companies like TomTom for using Linux?

Microsoft is now suing its partners a little more, this time not necessarily sending them to prison though. Here is what Microsoft is doing to computer shops, comparing them to murderers, just as the BSA did last week.

Microsoft New Zealand says it has entered settlement agreements with three Auckland PC stores that sold knock-off versions of its software. They are:

TDM Technology, operated by Ayman Franso and Nicholas Jansen; Pars TV, operated by Al-Huseiny Ibrahim; and PCTown, run by Linjiang Yu.

A Microsoft guy responded to this and so did a lot of the New Zealand press.

To summarise the points we showed here using evidence from the past week's news:

1. GNU/Linux is doing well on sub-notebooks and is expected to do even better in the future, thanks to energy-efficient ARM chips
2. In order to fight GNU/Linux on sub-notebooks, Microsoft lowered the price of Windows considerably
3. Microsoft's financial results will take a huge hit from the decrease in the cost of Windows
4. To create new revenue streams, Microsoft began suing Linux
5. To create some more revenue streams, Microsoft began suing shops that distributed Windows cheaply

Good times for GNU/Linux. As Microsoft's profits decline, its ability to hold on to products like Encarta (and even its employees) becomes limited. The harder Microsoft tries to suffocate GNU/Linux with price reductions, lawsuits, and a crackdown on Windows shops, the quicker it will injure itself. This changes the perceived value of Windows and alienates Microsoft partners.

Microsoft may not be announcing yet another round of layoffs, but judging by the news, Microsoft keeps offshoring its jobs (for savings) as much as it is allowed; it can also use those visas that were earned using corruption with Abramoff.

Here is another preposterous claim that what's good for Microsoft is good for America.

Well, no - actually, Microsoft's obligation is to keep itself afloat in these difficult economic times, so that it can continue creating revenues for the American economy. And it's no surprise Microsoft would look to foreigners for help - 35 percent of the company's patent applications last year came from its H-1B and green-card employees.

But these are delicate things to point out to the American public. Fearing more political demagoguery, Microsoft swiftly backpedaled, claiming that it plans to file "substantially fewer" H-1B applications this year, and adding that none of the foreigners will be replacing fired American workers.

This is a lie that was dismissed before. In many ways, Microsoft is a parasite to the American economy. There is also this in the news:

Foreign companies seeking to place workers in American jobs were the big winners in the past, with Indian technology companies Infosys Technologies Ltd., Wipro Ltd. and Satyam Computer Services Ltd. netting 9,154 spots for the 2008 fiscal year, according to Citizen and Immigration Services. By comparison, Microsoft was awarded 1,037 H1-B visas and Intel got 351.

Microsoft's workforce scale is almost on par with Intel's, so the Microsoft rates almost triple those of Intel. It's worth adding that Intel is among the most notorious companies in this area, and that's not even mentioning Microsoft's lobby, which by far outweighs others'. ⬆