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OSS Officially On Microsoft's Financial Radar Screen
seldo writes "More news from Microsoft's latest quarterly filing: according to eWeek, Microsoft says it may have to lower its prices in response to competition from open-source software. From the filing: "To the extent the open source model gains increasing market acceptance, sales of the company's products may decline, the company may have to reduce the prices it charges for its products, and revenues and operating margins may consequently decline". This is a fairly major revelation from Microsoft, and if it happens, it may be one of the biggest wins yet for open-source software: what do you know -- competition works!"
Before the muppets start talking about products can't compete with free, remember support costs, staff costs etc etc.
One element on margin is that it is estimated that Microsoft work around the 30% mark, while IBM work around 7% and are booking multi-millions in association with Linux. So this means that Microsoft will be reducing their margin, not becoming unprofitable.
An Eye for an Eye will make the whole world blind - Gandhi
PR... nothing more than PR...
It's not that they're wholly unaffected by the advance of Linux, but this statement should be bundled with others they use to show that "We have brutal competition... really!"
It was about time.
The thing that pushes ppl to Linux and Open Source is the price. Depending if MS lower its prices too much, it may cause a lot of ppl not to consider OSS software at all.
Who would want use and a disgruntled OS if they may get nice box, nice gradient buttons, stylish consistent GUI for a reasonable price?
Maybe it forces OSS software to evolve from merely copying proprietary functionalities to actually improve users' life in order to make a differentiation. A reason for ppl to use it. For now, it's price.
Microsoft has to put everything they could possibly think of that might conceivably cause the stock to go down even slightly in there, otherwise they could be held liable by their stockholders.
So while it's certainly nice that they finally have to publically announce this as a possibility, it really doesn't mean anything. I've seen some wild things in quarterly and annual reports.
-Todd
"The details of my life are quite inconsequential..."
So this is why the Microsoft Home Of The Future has no bathroom. They can't afford it anymore. Sweet.
Here's my scenario:
First, MS Office revenues will be hit and hit hard. OpenOffice does almost anything MS Office can do and it is not more difficult to upgrade from Office97 to OpenOffice than it is to upgrade to OfficeXP. - But a lot cheaper.
Only after an organization has successfully converted to OpenOffice, we will see full conversion to Linux.
Now we'll all have to see what Microsoft does without the hefty MS Office sales... Maybe XBox-gamers will have to pay a lot more because Microsoft can no longer afford losing millions over millions on it?
This is a fairly major revelation from Microsoft, and if it happens, it may be one of the biggest wins yet for open-source software: what do you know -- competition works!"
...Now if Microsoft interpreted the OSS threat the way they should and decided to counter it by open sourcing their stuff... THAT would be a major win for the OSS (by definition)!
Sigh. Since when was lowering Microsoft's prices a major objective of OSS?
This is *not* a big win. Contrary: it reduces the perceived difference between OSS and MS from a consumer's perspective and may even force Linux vendors to lower their prices and thus reduce their revenues.
This is really quite analogous with what happned when MS's cheaper solutions began to eat the Unix market from the workstation up.
At first, MS's main advantage was price, but gradually they innovated(*) and re-engineered so that their product was always high enough quality to attack the next layer up -- from word processing platform up through file/print server to heavy-duty servers and workstations.
Now MS are being eaten from below by a new generation of even cheaper systems. Like early MS systems, these open source offerings are both derivative and weak except for their price advantage. However, a price advantage is enough to secure a foothold, and over time open source systems will be strengthened and will begin to innovate and will be able to take over better and better MS-held markets.
In about 10-15 years, the cycle will probably start again, taking us another step further from the days of monolithic systems and proprietry hardware/os/support lock-in (which is where we were at before the Attack of the Killer Micros, young'uns). It's all good.
(*)Rather than freaking out and writing posts about 'M$' and so on, why not go outside and get some fresh air?
Whence? Hence. Whither? Thither.
I suppose the continuing sluggish growth in the US economy has nothing at all to do with it either. Isn't this the same sort of argument that the RIAA used to explain the drop in CD sales? "The competition from free sources is reducing our sales!" In fact, slow growth in the economy impacts all kinds of sales, including Microsoft's products.
Sometimes I worry that I'll develop Alzheimer's disease, but no one will notice.
A translation for those not fiscally inclined.
*large puffs of smoke appear, and a talking face begs you*
"Gosh darn it! Open Source is digging into our revenue. Lord knows that Open Source will be the down fall of all things good, look whats happening to our profits! **Ignore present world wide economic conditions they have no bearing here** I mean, we weren't really price gouging before, we were just looking out for our stock holders. Now our profits are going to go down because we have to lower our already, really, really, really fair prices or else we won't keep market share. It's unfair competition! **Ignore present world wide economic conditions they have no bearing here**"
***second translation***
"G*d d*mn this sucks, we have to compete now, we just can't buy Linus out. So much for our past competitive strategy"
"Science is about ego as much as it is about discovery and truth " - I said it, so sue me.
Despite all the comments on here about Slashdot readers, their Mum, Dad, Grandmother, Aunt, Uncle and kids using Linux on the desktop - I don't think the desktop users are making any significant decreases to sales of Windows XP just yet.
A year down the line though, who knows ...?
Avantslash - View Slashdot cleanly on your mobile phone.
I don't think OSS is making a big dent in MS revenues - it's still virtually impossible to buy a new PC without windows pre-installed (and pre-licensed).
Instead, I think MS is suffering from a lack of innovation. There is simply no compelling reason for corporates to upgrade their software anymore - Windows 2K is fine for business use, they don't get anything in XP other than support problems. You might upgrade Office to be able to read other people's files, but there are precious few "must-have" features to differentiate the current offering from Office 97.
The most significant reason for users to upgrade in the recent past has been MS's change in licensing policy - signing up before the deadline gives "free" access to upgrades for a limited period. I know that many corporates bitterly resented this pressure. However, the next version of "Windows for Servers" keeps getting pushed back, and many corporates are only now upgrading their servers from NT4 to W2K - not to take advantage of new features, but because support is being withdrawn.
So, while OSS is undoubtedly snapping at MS's heels, providing a much-needed alternative and nibbling away at the revenues, the bigger problem is that historically, Microsoft have taken ideas developed elsewhere and "embraced and extended" them. Right now, there are precious few radically new ideas to embrace, and the only way for MS to continue to grow their revenue is to find new must-have features. In short, they need to innovate under their own power.
Welcome to the real world, Bill....
It's all very well in practice, but it will never work in theory.
You gotta be kidding me! This reminds me of the old joke... a US Navy Carrier sees a big blip on the radar, and sends out of the radio:
"This is the USS Big Ship to unidentified target, please change course." The response comes back:
"That's a negative, Big Ship".
"We are a Aircraft Carrier from the US Navy. Now please change course!"
"That's a negative, Big Ship. We're a lighthouse"
For chrissakes, OSS has got to be the biggest stack of rocks sitting on MS's radar that they've had in a long, long time.
-- james
This quote appears on pretty much every "MS is scared of linux" article and has long since ceased to be "insightful".
Can we drop, it please?
I couldn't care less about the price, and I think the majority of OSS users isn't motivated by the low price. Hell, I can get windows for free just as well, just talk to my l33t h4ck0r neighbour kid and ask him to burn me a copy. The price argument is old & tired: get off it!
Even companies don't or shouldn't use OSS for it's price; dozens of researches have shown that the TCO (total cost of ownership) for windows and e.g. linux don't differ that much. They should use, as should individuals, OSS because they believe in the OSS philosophy and because the OSS style fits their own style of computer usage.
For me, it's about these things:
- From kernel to application, I can see exactly what it's doing and why
- If it doesn't work the way I like it, I can change it or try to find someone who already has
- I'm not a newbie, I know computers and I don't want to be treated as such
- If the configuration changes, I want to be the one who does it, not the OS itself
All these things add up to a package microsoft can't compete with, even if it would cost me more, not less that propriety software. And I wish everyone would stop hoping every last computer user starts using OSS, because it's just not going to happen, and it's just not necessary. Some people want ease-of-use, and others want power. Just so.
---
"The chances of a demonic possession spreading are remote -- relax."
I am unsure that this is a good thing. I think you all should be a little skeptical too.
Why does anyone want to see Microsoft go down the tubes?
Sure, they have been overcharging us for their OS and office software for years, but it isn't like the money didn't go to good use. After all, most of the features that we see in OpenOffice and other useful apps for Linux came from ideas that were original or at least perfected (I use the term loosely here) in MS apps.
Sure, I love the GNU project, Linux, and OSS in general, but would we even have a target to hit with our free software if we didn't have a company like Microsoft to chase after?
I hate to see the mob mentality take over with this 'Linux vs. Windows' stuff rather than contemplate what a collapse of Microsoft would really mean to us (as developers, users, etc.)
If it's not one thing, it's Steve's Mother
Businesses are willing to pay for value delivered. They are not, however, willing to be raked over the coals, especially by someone who is making the profit margins that Microsoft makes in an economy that has everyone else scrambling to make a buck.
Add in the costs of continual upgrades -- required by Software Assurance, BTW -- and the hardware to support them, and the lost productivity due to bugs and security flaws, and we have some unhappy campers out there.
OSS alternatives mean that Microsoft will have to lower prices, probably to a level lower than pre Software Assurance days. Customer anger and memories mean that it may not be enough to keep some of those customers from going away for good.
...It may just kill off a lot of the incentive for people to switch to Linux.
/. are pretty experienced computer users, people who are willing to spend the time to carefully tweak Linux to their own satisfaction and spend the time to chase down proper Linux hardware drivers.
What would happen if Microsoft suddenly cuts the pricing of a legal copy of Windows XP desktop editions by 50% or more for everyone? Because Windows is vastly better-supported in terms of hardware support than Linux, sales would definitely increase quite a bit.
Yes, Linux is cheap when you get the personal edition distributions, but when you have to spend time to tweak it to support the latest hardware, plus the fact a lot of the latest hardware lack Linux drivers, the result is a potentially frustrating experience for non-experienced users. I think a lot of people don't realize that many of the posters on
Microsoft has only two profitable products (Office and Windows) that strongly depend on each other.
I adore how cute it is when some FUD is propagated on Slashdot, and soon you can hear it being repeated verbatim as stone-cold facts time after time by Slashbots. Microsoft has three profitable divisions: Client, Server Platform, and Information Worker. I'm hardly surprized that some dullards interpreted that as "Office and Windowz!", yet in reality those three divisions account for the overwhelming majority of products with the Microsoft name on it. SQL Server? Yup. Visual Studio? Yup. Visio? Yup. SNA Server? Yup. Indeed, if you looked within even the unprofitable divisions you would find a bevy of highly profitable items: The Home and Entertainment Divison encapsulates Microsoft hardware, such as mice and keyboards, which themselves are highly lauded and tremendously profitable, however their profitability is being masked by the xbox.
This is all so laughable anyways, and indicates the core naevity of most open sourcers. Egads Microsoft mentioned open source! The reality, of course, is that such filings must include forward looking risks of any sort, including potential lawsuits, and envisioned risks by the pundit community. The fact that open source is mentioned in there is a given. To make this even more hilarious, though, the prior quarterly report included the same risk statement, while the quarterly report before that included the statement "the availability of competitive products or services such as the Linux operating system at prices below Microsoft's prices or for no charge" as a risk factor. Looking at the annual report from 3 years ago yields the statement "With an increased attention toward open-source software, the Linux operating system has gained increasing acceptance. Several computer manufacturers preinstall Linux on PC Servers and many leading software developers have written applications that run on Linux. Microsoft Windows operating systems are also threatened by alternative platforms such as those based on Internet browsing software and Java technology promoted by AOL and Sun Microsystems. " and " The Company continues to face movements from PC-based applications to server-based applications or Web-based application hosting services, from proprietary software to open source software, and from PCs to Internet-based devices.". I'm sure I could go back two more years and find similar forward looking risk statements.
I suspect that someone read an SEC filing for the first time in their life and thought they found a real revelation (as did the Slashdot editors when they posted this), when it's the same thing that has appeared in their filings for years now.
I adore how cute it is when some FUD is propagated on Slashdot, and soon you can hear it being repeated verbatim as stone-cold facts time after time by Slashbots.
and then go on to chatter about keyboards and Visual studio. Can you reasonably compare the proffit bassed on M$'s O$ to keyboard sales? The price of VB may pain individuals who cling to M$, but that individual pain does not collectivly match the vast revenues had when big dumb corporations stick Office on every one of their 7,000 peons desks. No, it's true that M$ is using it's O$ monopoly rent to get into other areas.
The fact is that there is nothing new here but failure. M$ gets into each new market the same way, by dumping . The used IBM to make an O$ monopoly then dumped Windoze 3.1 to establish a desktop hegemity. They then used anti-competitive agreements with vendors to keep other O$ out and dumped their office to make familiarity. To this day M$ dumps their software on schools, then turns around and screws them in quater million dollar BSA raids. Their reduction of prices of their vastly inferior "server" software is par for the course but it will not be enough this time.
People are realizing that free makes economic sense. They are starting to see that free software is better software and always will be. Better software does make for a lower total cost of ownership as it eliminates the intentional waste propriatory software vendors are famous for. More importantly, it does what YOU want it to do rather than what some marketdroid thinks it should do and it does it according to best practices. Slammer, Code Red, Nmedia, SirCam, I love you, Klez, la te da te da, the list goes on and on because the closed source, rape the user method does not work for anyone but the vendor.
Friends don't help friends install M$ junk.
Yes, and I am sure that they make money off the gumball machine out in their front lobby too. That doesn't mean that the proceeds from said gumball machine have any great effect on Microsoft's bottom line. Last quarter Microsoft generated an operating income of $1.97 billion on revenues of $2.44 billion. MS Office had similarly ridiculous profit margins with an operating income of $1.88 billion on revenue of $2.41 billion. There are plenty of companies with those kinds of revenues, but only Microsoft has the combination of high revenues and ridiculously high profit margins. Even Microsoft's server software margins are only about half of the Windows and Office profit margins. I can guarantee you that, compared to Windows and Office, the profits on keyboards and mice are insignificant. What's more, there is no possible way that Microsoft could ever be even a tenth as profitable selling hardware.
Thanks to Windows and Office Microsoft is the software powerhouse, without the huge profit margins from these two products they probably wouldn't even be competitive.