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Microsoft Revenue Up, Tries to Hook Third World
rocketjam writes "Microsoft reported record revenue for the last quarter Thursday due to increased sales of personal computers. Analysts were impressed with the company's overall performance, however they expressed concern about the continuing drop in unearned revenue, reflecting Microsoft's difficulty in signing up customers for long-term, sustainable business contracts. The $400 million drop in unearned revenue was less than the drop in the last quarter but still exceeded many analyst's expectations. The company's continuing problem in gaining long-term contracts is generally attributed to growing security concerns among customers and company's unwillingness to go along with Microsoft's 'Software Assurance' upgrade subscription plan." Also in the news: Microsoft is donating a pile of software to the United Nations -- retail value, $1 billion; wholesale value, maybe $1 million or so -- attempting to hook the Third World on Microsoft software.
Aah, but is it profit they are after? Seems to me that when Microsoft gives software away these days it is not so much to hook people, but to keep them from going to Linux.
The third world are not that stupid. They know what accepting these microsoft hand-outs would mean.
Microsoft are acting just the same as the drug dealer offering the first fix for free.
Jolyon
Please read my Canon EOS tech blog at http://www.everyothershot.com
Since this is an obvious 'spark' for a flamewar (with Mikey, of course, throwing a bit of gasoline on the fire with made up numbers), why not go ahead and throw in a judge says that MS is holding up their end of the antitrust pact. That will not only generate the clicks that you guys want to see, but the incoming flamewar, perhaps, could break a new record on most posts on an article.
Good quote, too many chars. Seriously, the slashdot 120 char limit sucks!
Are you on crack?
Microsoft can't "remotely deactivate" any version of Windows XP any more than I can reach into your hard drive with my mind and delete your OS. And even if they could, any government with an ounce of programming experience would DISABLE Windows Product Activation through a crack, or even use the Corporate version, which doesn't ask you for it.
Are you trying to imply that all software created in the United States should only be distributed to countries that the US explicitly approves of or something? That's not the way the world works, and that's certainly not the way that I would want MY software handled if I lived in the US.
It's better to vote for what you want and not get it than to vote for what you don't want and get it.
- E. Debs
I remember reading about Nestle bringing baby formula to 3rd world countries. "Use this instead of your own breast milk. The succesful and healthy parents in the United States do, so it must be better."
The problems started to show up immediately. First, there was a limited supply, so the parents would try to stretch the formula. Second, there isn't usually a source of purified water in the middle of poverty stricken 3rd world, so they would use water that often had bacteria. 3rd, after using the introductory supply up, they were basically forced to keep using it going forward because the mothers had lost the ability to generate milk.
Nestle made a great profit because there was a high demand, funded through help funds, and also because they generated a captive audience.
I wonder if there will be equivalents here where Microsoft essentially 'addicts' them to using their software while leaving any content expiration intact so they'll be obligated to stick to acquiring new MS things going forward.
Right, but you don't get the linux distribution for free today along with an obligation to pay upgrades a year from now.
The intention here is to give away software for free today so that it gets incorporated into their daily flow and people become dependent on it. Then, with the mandatory upgrade cycles, people are forced into paying money.
It's very much akin to a drug dealer: "The first one's free"
After that, you're hooked, and have to keep coming back & giving them your money.
Donating software to the rest of the third (or second) world is akin to giving amnesty to piracy. The vast majority of software is pirated in these regions due to the dollars MS wants. In China, they sell PCs with Linux or no OS instead of MS OSs because MS wants 70 bucks per computer. The user just buys a 1 buck CD with his computer that has a pirated copy of windows.
Plus, has anyone heard whether or not they'll be donating $1 billion in "Magic Schoolbus" educational software like they tried to do with their anti-trust settlement a few years back.
My consulting business has dealt with third world firms, and their lack of legitimate software has caused some problems in the past. Microsoft's giving away of their software to encourage more business is only a good thing for me, my business, and my employees here. Foreign workers have actually caused our profits to rise, and since all my employees get a good chunk of the profits, I'm able to hire more people here and pay them more.
In my retail business, we give away free rentals of our sports equipment to young kids with parental supervision. 10-20% of those kids either buy the rental equipment outright, or come back for something better to buy. It is a good business initiative to give the item away.
Cigarette companies have sent me free cigarettes to try a new product. Free samples of pain killers have helped my family switch to new brands. I've tried numerous foods in the supermarket that were given away free. I switched health clubs after doing a 2 week free trial. My shampoo I use is even one I picked after trying a profit-loss trial size.
Why is this wrong? Microsoft products help almost 95% of my customers make money by not having to train users on a system they are unfamiliar with. I'm glad to see Microsoft take the initiative and a big risk in giving away the free software. I hope they continue to do so and I know I will reap the benefits in finding more firms to deal with overseas.
Maybe an accountant can answer this question:
How much does Microsoft get to declare as a tax deduction when it donates software?
For example, say Microsoft donates a CD, and that CD cost $1 to manufacture, but it contains software that normally retails for $100.
What does Microsoft get to deduct for their charitable donation? Is it $1? $50? $100?
If it is anything more that $1, then Microsoft is making a profit. In effect, money would be being transferred from other taxpayers to Microsoft.
a "freebie", that is.
Like other posters have pointed out, these third world countries will not be able to affort the hight prices of upgrades. Sure they would take the freebies - it would be smart, but I doubt Microsoft is going to gain the long position.
The dynamic in Microsoft's finances right now is really illustrating a couple of things: (1) market pressures by solutions offered by other (open source) alternatives, and (2) the beginnings of the effects of their predatory reputation and business practices in light of #1.
Software is in may regards (and this is a controversial statement) becoming a commodity. When that happens pricing pressures take hold. Microsoft is entering this phase of its company's life. It can no longer hold onto and expand the market by monopolistic tactics. The open source movement, general awarness and a growing sense of displeasure in the business community with Microsoft's tactics and pricing, and of course the anti-trust trial and verdict (however inadequate we feel the "punishment".
The bottom line is that Microsoft's business success was base partly on its ability to meet customer needs (minus security), but was propped up by its predatory behavior.
I see this trend continuing until Micrsoft's pricing comes in line with upcoming competition (GO LINUX DESKTOP!!!). We are in the middle of a paradigm shift, ladies and gentlemen.
Is the juice worth the sqeeze?
but you have to remember that they are doing it for business reasons. just like pharmacutical companies dump useless drugs in poverty/famine stricken countries and regions (well ok, maybe not that cynical). there's probably some tax write-off they can make, plus they get to permeate the market so that other OSs don't get a look in. i also think BG wants to make himself look a great guy, need proof? check out the BMG foundation website.
Take away the right to say "fuck" and you take away the right to say "fuck the government." - Lenny Bruce
Revenue is not the same thing as profit. Revenue is your gross income. Profit is your net after expenses. If you look at their financial statements and the MD&A you will notice that the decrease in profit is due to "$1.31 billion in stock based compensation expense associated with the employee stock option transfer."
There is no spin here except for your post. If you eliminate the effect of the stock options their expenses as a % of revenue actually decreases.
You somehow relate the fact that Nestle baby formula isn't as good as breast milk to Microsoft donating computer software. Congratulations on the wackiest stretch of an analogy I've ever witnessed.
It's not whacky at all. The principle aim of Nestle's baby-formula scam was that they'd donate just enough formula for the mother's own milk to dry up, after which ... lock-in: unable to produce her own milk, she would be dependent on the formula if she didn't want her baby to starve (pretty likely scenario.)
Fairly appropriate analogy, really.
Corporation, n. An ingenious device for obtaining individual profit without individual responsibility. - Ambrose Bierce
distribute linux around third world countrys??
1)Its free anyways (from ftp)
2)Its more stable
3)It has better language support.
4)More features (working, wanted ones)
Only drawback I can see is that the same arguments could be made against linux, ie. We are trying to monopolise the third world, so we can get even with a company that has done wrong in the past (and still is.[anti-trust case's])
Sig (appended to the end of comments you post, 120 chars)
MS seems to be very definitely losing market share at least here in India. Most computer manufacturers including Dell and Acer are selling PCs and Laptops with Linux and Openoffice pre-installed. One of the indian manufacturers... HCL is advertising a modestly configured PC (1.7GHz, 128MB RAM, 40GB hdd, 15" CRT) for the equivalent of $250 with Linux and Openoffice installed.
Many people may replace it with Windows, but at least you're free from the Microsoft Tax if you choose to use Linux. And I'm sure many people will at least try it and be shocked by the staggering loss in performance when they install, say, WinXP on these machines.
Our buddy Darl says that Linux can be downloaded for free and used in North Korea, Afghanistan, and other terrorist filled countries.
But Bill Gates goes into these countries and gives his software away for free also. To sweeten the pot, he takes a tax deduction for donating product to 3rd world countries. The tax deduction is inevitably MORE than the cost of distributing the software, thus bringing Microsoft profit.
How does this make Microsoft, as a corporation, a more responsible member of the community than us 'Penguinistas'?
Ahh, you're the original poster aren't you? Hmm, quoting your post:
k
"Only in michael's bizarre world is it bad for a company to donate free things"
Mine:
" Nestle, anyone? For years they've been donating formula milk to hospitals in the third world. This isn't as good for the kids as their mothers' milk (...) By giving away the product for free, they cause major problems."
(http://www.google.com/search?q=nestle+baby+mil
if you want more information, once you've removed Slashcode's spaces.)
I call troll here, or stupidity at best. You can't see how a donation could be harmful to the recipient even though it has clear utility, I provide one. That's not an analogy at all, let alone a wacky one.
To get back on-topic, the reasons this is a problem for MS are vendor lock-in and monopoly status. As a convicted monopoly they're supposed to be restricted from doing some things that could help their market status - which would often include dumping such as this. And as a sole supplier, accepting the donation imposes future costs, payable from recipient to donator. Accepting Linux donations (and I'm not a Linux fan in the slightest) would be fine for the simple reason they could go to any number of future suppliers, or relatively simply produce their own future solutions from existing public documentation about the workings of their components. Same for any open source solution.
Greg
(Inside a nuclear plant)
Aaaarrrggh! Run! The canary has mutated!
I've got plenty of hardware, from old pentiums to dual p2 300's with SCSI drives, and I've got more workstations and servers than I need... I'm sure I'm not alone.. maybe the local library could use some, but I've always been partial to latin america..
My Linux Command of the Day site : LCOD
I'm heading for Africa this Fall. One thing I'll end up doing is computer work.
I have a friend who is setting up some computer labs for elementary schools. I pleaded with him to go with Linux -- easier to lock down and maintain (by a qualified individual), but mainly because of the hook effect. Even if you got windows free, it will then be all that those students know, and will result in money flowing from countries that can't afford it into the coffers of Redmond.
You don't have to be a militant-anti-globalist-protestor to understand that it isn't a desirable situation.
It is in situations like this that the freedom of open-source makes the most sense.
BTW, tobacco companies are doing the same thing. Hook the 3rd world and send the profits to the US.
Namibia said "Screw you!" and kept on using Linux.
Khomar, you're making the same mistake Marx did. A thing's value is not derived from the costs involved in making it.
Value is totally subjective and unmeasurable. A rough approximation can be made based on market price, but that's somewhat faulty too because the trade medium (money) itself has different value to different people. $100 is is more valuable to someone who earns $20K/year than it is to someone who earns $100k/year.
A ratio of $s/time to earn can be used to more closely approximate comparative value of a thing for models but even so that ignores differences in individual tastes/wants/needs. Basically value can only be measured on individual case by case basis by the individual making the buy/not buy decision.
To expand on this: If the third world wasn't going to buy the software anyway (likely) and the MS development costs stay the same (very likely since the have so many customers) then the total cost of the "donation," from Microsofts perspective, is the cost of shipping CDs and paper.
The key here is that the new MS users probably wouldn't have been MS users at all if MS had not "given" them the license so MS doesn't lose out on any revenue because of the "gift". Also MS doesn't have any added costs (above the CDs) because it had already developed the product. billion vs 1 million acutal? Yeah, the numbers look good to me.
TW
Geeks unequivocally will tell you XP software is entirely software because they use [insert Linux distro here] and it has so many [insert tons of benefits here]. But this doesn't reclude the fact that: 1. Linux is virtually not marketed, Tom Dick and Harry havent' even heard of thing 2. Not ready for the desktop. It's NOT simply enough regardless of what Mandrake people will tell you. Simple for geeks, but not to grandma, and that's what matters. This is why computer systems that are used almost solely by geeks (databases and servers) are run by Oracle and Linux, NOT Microsoft.
Corporations: your universal scapegoat for all society's ills.
You forget the classic MS tactic of donating some software, getting a country to sign an insanely long-term contract, and then, by normal MS methods, pushing upgrades via non-compatible software (...Office...).
Worse, in the Caribbean, they've somehow gotten the Carib equivalent of the SAT, the CXC, to include a MS-specific computer section, such that even if a high school was interested in Linux, they'd still be obligated to teach MS Office and Access to their graduating seniors who wished to take the IT subject test. That's some serious lock-in.
They also send their licensing police out, to make sure you're not pirating anything.
And don't even get me started on the hell that is Windows Update for a computer lab that shares a single, pay-per-minute, dialup connection.
Returned Peace Corps IT Volunteer