05.17.08

Competing by Crippling a Competitor’s Product

Posted in Finance, GNU/Linux, Office Suites, OLPC, Open XML, OpenDocument, OpenOffice, Windows at 7:20 pm by Dr. Roy Schestowitz

Microsoft: innovating or handicapping?

Return on investment (RoI, or even return on revenue (ROR)) is an interesting economical notion when you are a monopolist. On the one hand, if you introduce a new technology, then you add risk. If you introduce new products, you need to invest in development. So why develop anything? Why ever improve?

On the other hand, how about breaking compatibility or castrating features from rival products? How can this ever be achieved? How about subverting their development process and making them financially liable/obliged (e.g. using software patents and contracts)?

“To Microsoft, as history has shown many times before, sabotage of competing products has usually been seen as the more preferable choice.”In the face of strong competition, the situation can be further complicated. What would be the more financially-viable and thus the wiser response? Would it be to make better products or to simply to break the products of that newly-emerging competition? To Microsoft, as history has shown many times before, sabotage of competing products has usually been seen as the more preferable choice. Why improve your own when you can vandalise others’? Like a totalitarian regime, one needs to identify and then eradicate dissidents while they are young, just before their roots spread too widely and reach critical mass, exposure.

Increasingly — although it’s not entirely obvious — what’s described above is a tactic which is used not only against GNU/Linux and Free software, but also against competing office suites and disruptive trends like SaaS. Microsoft spent money on generating FUD ‘studies’ which mock Web-based applications (including office suites) before realising that it must adapt to/embrace them and therefore it can no longer suppress and fight them. The same goes for many other things (not just office suites), which is why Microsoft tried (and failed) to move Office online and sustain revenue. Subscription and ads were attempted also, but they are seen as experimentation.

Microsoft just loves to rave about OOXML as though it promotes competition and permits applications to inter-operate more nicely, but that’s just utter nonsense that can be made believable if it’s repeated often enough. The reality is, as BECTA put it very recently [1, 2, 3], that Microsoft just continues to limit choice, not only using OOXML but also using predatory licences.

In 2005, the same group published a study showing that British primary schools could save up to 50 percent of their software costs by choosing open source applications over “proprietary” ones.

In a related piece of its complaint to the EC, BECTA charges that Microsoft is displaying “anti-competitive practices” by requiring all computers on a school campus to carry Microsoft licenses, if any of the computers use such licenses.

Those who were led to believe that OpenOffice.org does not hurt Microsoft needn’t look further than articles such as this new one and also take a glimpse at Microsoft’s latest report which shows a decline in Microsoft Office sales. Appended at the bottom [1, 2] are a couple of separate yet slightly repetitive messages that I posted in public an hour ago.

All in all, OpenOffice 3.0 shows that you don’t have to pay a bundle for a great office suite. In fact, you don’t even have to pay a penny.

Returning to the key subject at hand, Microsoft’s fight against competing office suite is actually very similar to the way its fights GNU/Linux. It’s not about improving its own over-priced product, but about ensuring that others cannot work properly.

We recently wrote about the crippling of laptops (affecting both Windows and GNU/Linux, to Microsoft’s benefit) and artificial restrictions on motherboard-tied hypervisors. One reader mailed us to add: “Low end computers are about to swing 180 degrees away from Microsoft. Microsoft is really feeling the pressure and fighting back the only way it knows, not by improving, but by trying to trip up the competition.” █

___
[1] If the numbers are still correct, Microsoft has pumped $36,000,000,000 into its stock because *real* investors was leaving (buybacks). This leaves Microsoft with the possibility of going into debt of about $30,000,000,000 pretty soon (they have a proxy fighter shooting heads inside Yahoo!) and the company’s value declined another $30,000,000,000 in the past 3 months.

Is Microsoft Aura Fading?

,—-[ Quote ]
| Yesterday’s early relief rally reversed, and Microsoft’s value has now fallen
| by more than $30 billion since it unveiled its bid for Yahoo on February 1.
`—-

http://online.wsj.com/article/SB121004447596669953.html?mod=googlenews_wsj

To the extent possible, Microsoft will continue to use the press to feed people the illusion that the company is in good shape. It’s not. At the moment it sells Windows for just $18 (laptops). It has no choice because Linux was eating its lunch. How fat can the cash cow be at $18 apiece?

,—-[ Quote ]
| A prominent example of open source software is the Linux operating system…
| To the extent open source software gains increasing market acceptance, sales
| of our products may decline, we may have to reduce the prices we charge for
| our products, and revenue and operating margins may consequently decline.
`—-

http://www.microsoft.com/msft/SEC/default.mspx

[2] Microsoft’s greatest problem revolves around profits per unit. In their SEC they said:

,—-[ Quote ]
| A prominent example of open source software is the Linux operating system…
| To the extent open source software gains increasing market acceptance, sales
| of our products may decline, we may have to reduce the prices we charge for
| our products, and revenue and operating margins may consequently decline.
`—-

http://www.microsoft.com/msft/SEC/default.mspx

Recently a leaked document showed that they give Windows away for just $18, so the warning you see above is already a reality. Ballmer called Linux the company’s number 1 threat in February. Under a months ago we came to discover that the company’s sales of Windows declined 24%.

Also see this recent one (a week ago):

Wimpy: Why is Yahoo so afraid of Microsoft?

,—-[ Quote ]
| This has everything to do with business and nothing at all to do with
| technology. Wearing my business reporter’s fedora, then, I’ll point you back
| a week or so to Microsoft’s most recent earnings announcement, which
| disappointed Wall Street. This is significant because it is hard to find a
| Wall Street analyst who remembers the last time Microsoft’s earnings were
| disappointing. It simply doesn’t happen. That’s because Microsoft has a
| myriad of tools for adjusting the numbers to look just right.
`—-

http://www.pbs.org/cringely/pulpit/2008/pulpit_20080509_004880.html

Shades of Enron, but never mind.

Around the same time:

A reminder of why Microsoft wanted Yahoo

,—-[ Quote ]
| Henry Blodget at Silicon Alley Insider has posted Tuesday a good look at how
| Microsoft’s Windows and Google’s search will stack up by 2009. The results
| aren’t necessarily surprising, but they’re certainly interesting to see in
| print: By this time next year, Blodget predicts, Google search will pass
| Windows in total revenue.
`—-

http://www.news.com/8301-10784_3-9943247-7.html

Recent:

Is Microsoft Aura Fading?

,—-[ Quote ]
| Yesterday’s early relief rally reversed, and Microsoft’s value has now fallen
| by more than $30 billion since it unveiled its bid for Yahoo on February 1.
`—-

http://online.wsj.com/article/SB121004447596669953.html?mod=googlenews_wsj

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