08.03.09

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Microsoft Fails with Gadgets and Moves on to Toys

Posted in Finance, Hardware, Microsoft at 3:27 am by Dr. Roy Schestowitz

Funny eyes

Summary: Microsoft’s experimentations with DRM on commodity hardware fail, but new products appear on Amazon

MERCURY News has this interesting article about what came to be a disaster. Microsoft’s Zune not only failed to topple rivals but it also lost Microsoft a lot of money. Here are some numbers:

To be sure, the Zune provides a tiny, and apparently deteriorating portion of Microsoft’s business. Revenue for the non-gaming side of Microsoft’s Entertainment and Devices unit, which includes the Zune, tumbled 42 percent to roughly $211 million for the fourth fiscal quarter ended in June — or about 2 percent of the software giant’s total, according to regulatory filings.

Bill Gates and his colleagues are very concerned about the iPod, as internal correspondence reveals.

“The reality of the matter is that in its hardware business (mostly XBox and Zune, not just peripherals) Microsoft is losing billions.”The report above is important because many people’s assessment is based on the illusion Microsoft spreads about profitability and invincibility. The reality of the matter is that in its hardware business (mostly XBox and Zune, not just peripherals) Microsoft is losing billions. It is the same with Microsoft’s business on the Web.

A better-known blood relative of Zune is Windows Mobile, which is falling further and further behind as Microsoft fails to maintain this ‘ugly old hack’ of Windows. It is just too expensive to do this alone and Microsoft’s acquisition of Danger is unlikely to change anything. The Wall Street Journal has this short article that indicates not much will change any time soon, which means that Microsoft’s market share in mobile devices will only erode.

Microsoft has a new version of its mobile operating system, Windows Mobile 6.5, coming out on cellphones in October. But that software is generally recognized as an incremental improvement on past versions. So far at least, there don’t seem to be any announced handsets that will run the software that are blowing critics away.

Watching how Microsoft failed to turn a profit outside the core cash cows, John Dvorak asks if the party is over for Microsoft. As he puts it:

Everyone knew the day would come when the fortunes of Microsoft Corp. would reverse. The company might now be in actual decline.

[...]

I could go on with home-automation initiatives, phone operating systems, pen computers (two shots at that market), page-layout programs, Web-design tools and on and on — all shiny objects for a company that doesn’t want to actually fill a need, but jump from one idea to the next.

What’s shocking is that the cash cows, specifically the Windows operating system and the Office suite, have managed to finance all these idiotic efforts for so many years. While Microsoft’s profits and sales were way down this last quarter, it is only a matter of time before losses begin. Read more about the disappointing earnings.

The column above mentions Microsoft Barney Actimates, which proves that Microsoft still tries to sell tangible things, not just licences. A while ago there was also a lot of talk about softwear [sic], which is about Microsoft selling clothes. To be sarcastic here, there’s a future for Microsoft in selling something other than licences (clothing and toys) if DRM-laden devices prove to be a failure, which they do. As the next post will show, the XBox business continues to be a disaster that’s costing Microsoft billions.

As a bit of side news, another Microsoft product is now being delayed (at least not canceled like many others). It’s just not working right.

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