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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.
Mikey adds "
Do you have any real data to back this up, Michael, or is this yet another of your unnecessary and unwanted biased editorials? Not that I'm in the pro-Microsoft camp but a 1000-to-1 profit line sounds pretty high. This is shoddy "journalism".
Feel free to bitch slap me and any subsequent thread.
Trolling is a art,
Microsoft would donate cash and the latest versions of its software, but the centers were free to expand with other software, including open source software such as Linux, Gates said.
"They'll be adding software from other providers. There's no exclusivity," he said. "Our role is to bring software that is quite popular, and happens to be ours."
Mod me down if you must, but I applaud Microsoft for this. While Linux or other open source OS use is definitely on the rise throughout the world, Windows is still the primary desktop of the business world, and this should indeed help people to enhance their skills and thus their marketability. You might say that they could potentially become "hooked" to Microsoft software, but again, there's no clause that limits them to using it, so I can only see this helping people. Bravo.
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
retail value, $1 billion; wholesale value, maybe $1 million or so -- attempting to hook the Third World on Microsoft software.
That's the difference between Microsoft's wholesale and the MSRP? Amazing...and that's without the Software Assurance, I'd imagine. Man, am I in the wrong business or what?
I'm glad you're here to tell us these things.
A programmer is a machine for converting coffee into code.
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.
That probably is their "marginal cost". Look that one up in a Finance book.
attempting to hook the Third World on Microsoft software
While I'm an avid Linux fan, why do I get the feeling that if a large Linux distributor like Red Hat arranged for a glut of software to be sent to UN countries, the headline would have been slightly more flattering? Something like "generously supplied Third World coutries with Linux software" instead of the negative connotations implied with "hook" that is attached to Microsoft's gesture.
> $400 million drop in unearned revenue
:))
call me old fashioned but shouldn't any
revenue be EARNED ???
We learn from history that we learn nothing from history - Tom Veneziano
"In the news today, something good happened to Microsoft. However, we at OSDN feel we must say something bad about them, so as not to focus less on the positive, more on the negative. Thank you for nodding your head."
I can't see that it really matters if Microsoft tries to "hook" the Third World on their products. The Third World can't _afford_ Microsoft prices (sort of what makes them Third World) and so if they are using Microsoft products it will be at no gain to the company's bottom line.
Learn to spell: nickel, missile, lose, solely, amendment, speech, kernel, probably, ridiculous, deity, hierarchy, versus
...is because they KNOW they have bad publicity. I dont think they expect to make a whole lot out of this market. But, it will help to make them look like the good guys.
Just my humble opinion,
SirLantos
The flying hamster of DOOM rains coconuts on your pitiful city.
Isn't giving away tons of Microsoft software like trafficking in weapons of mass infection? Shouldn't that be against some international law or something? I mean, what could be worse than a million extra Outlook and IE clients all unpatched and ready to act as virus broadcast stations?
:^D
Yeah, yeah, I know. Not fair. So mod me down.
Curmudgeon Gamer: Not happy
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!
For those of you who are not accountants:
Unearned revenue is actually not a P&L item. It is a liability on a companies Balance Sheet. If I prepay for a service the company has to recognize that revenue over the life of the service. So if I pay for a years worth of service from Microsoft for $12,000 they can recognize $1000 each month as revenue and reduce the liability by $1000 until the 12 months are up and the $12,000 has entirely hit the P&L.
The decrease in unearned revenue means that people aren't locking themselves into Microsoft but it doesn't reflect at all on what Microsofts future revenue will be. If anything companies that do end up sticking with Microsoft may pay more in the long run by not taking advantage of prepayment discounts.
And yes - I am CPA.
Not neccisarily. During the 90's MS knew that software priacy in China (real copy/sell piracy not ??AA piracy...)was big in China, but they let it happen because they the Chinese would get 'hooked' and MS products and then MS could really turn the screws and milk them. Drug dealer tactics. The first one is always free.
My days of not taking you seriously are certainly coming to a middle...
"however they expressed concern about the continuing drop in unearned revenue"
Isn't that the same as saying:
"however they expressed concern about the continuing rise in earned revenue"
Wow. I don't like the company but I'd like to share their FD's revenue concerns.
"It's not your information. It's information about you" - John Ford, Vice President, Equifax
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
Yes, but there are a few benefits to this:
1) They have a chance to get in on the ground floor in those countries. If all the people there are used to using MS software, guess what they'll keep using if/when the economy starts to get going?
2) It pushes the numbers of people using Windows up, which is what a lot of PHBs look at. "Why would we switch over to Linux when 99% of the world uses Windows?!"
3) Tax write-off.
4) Looks good to consumers - "Wow, they're so generous!"
5) Maybe MS just felt like being nice. There's no exclusivity agreement, so even if the people there take the free software, there's nothing stopping them from using alternative software if they feel like it. Pretty cool of MS.
You don't really lose money on a sale you don't make -- unless you're using **AA style accounting methods, that is. Someone in a 3rd world country running a pirate version of MSWindows for example because they can't afford to buy a retail version doesn't take money out of Microsoft's pocket. They could be running Linux instead, and it still wouldn't be an actual loss for Microsoft. It would just be one less sale against profits.
Instead I see this as:
a) A big PR move for MS (MS gives $billion to the poor)
b) Tax write off
c) An attempt to displace non-MS OS's in regions where MS cannot otherwise compete.
All of the above benefits MS at a very cheap cost to them.
"It's the height of ridiculousness to say for those 9 lines you get hundreds of millions."
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.
A friend of my put it best ..
"In other news, crack dealers give first hit of crack for free to kids"
[alk]
Read the statements again. 3 month income is down, year over year.
Microsoft is trying to spin this as improved results, but they are just playing a shell game. Note that the increase revenue is more than balanced by increased expenses. Translation: Microsoft is buying sales and hiding the costs. Translation of the translation: Microsoft is being forced to offer heavy incentives to move their tired old products. Translation of the translation of the translation: a million Penguin bites really do hurt.
When all you have is a hammer, every problem starts to look like a thumb.
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.
get it right after all the first two worlds has been throught with MS products. Then again, maybe McBride is in the 3rd world as we speak preaching the evils of the GPL. Here's to the the 4th world!
"Look Lois, the two symbols of the Republican Party: an elephant, and a fat white guy who is threatened by change."
According to their Annual Reports MD&A they make a profit in Client (Desktop OS), Server, and Information Worker (Office, Visio, etc.). They lost money on Business Solutions (Great Plains Acct Software, etc.), MSN, Mobile and Embedded, Home Entertainment (XBox, etc.), and Other (which had something to do with the sale of Expedia).
Interestingly enough the server sales (which is where is and can do the most damager) is not that big a part of their income. Windows (for the desktop) and Office and really their moneymakers (and probably will be for quite some time.
Presumably the people getting this free software are exactly the people who might be looking at free software as a cheap alternative to MS.
Giving them free stuff therefore loses MS very little in sales, but ensures they are all gaining experience and expertise in MS not Linux etc. So when they do have the money to spend on software, they will do so with Microsoft.
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
You took a thread about Microsoft and turned it around so I'm now picturing big, beautiful milk-surged titties. AWESOME.
Michael didn't say "from a manufacturing perspective." What he said was pure flamebait: "$1 billion retail, probably about $1 million wholesale." Please.
Or McDondald's who gives you a free burger. Or iTunes giving away a million songs for free. Or netflix giving you one free month of rentals. Or Columbia House giving you 10 CD's for a penny. Or AOL giving you a zillion free hours. I think I've discovered something. Drug dealers actually operate like other businesses. Of course in my life time I've never acutally been offered free drugs. The supply is much lower than the demand, the dealers have no problem moving their stuff without giving any away.
Jack Valenti and Orrin Hatch will be first up against the wall when the revolution comes.
I can't see that it really matters if Microsoft tries to "hook" the Third World on their products. The Third World can't _afford_ Microsoft prices (sort of what makes them Third World) and so if they are using Microsoft products it will be at no gain to the company's bottom line.
You seem to have completely missed the finer points of monopoly versus normal competition. The very last thing you want as a monopoly is a competitive alternative. Read up on some basic economics about profits in monopoly versus duopoly and how much money it's rational to sink into barriers to entry.
Microsoft would want nothing but for the third world to use their products, both officially (like this giveaway) and unofficially through piracy, because it means they're not using anything else. While they may cry their hearts out over the massive piracy, the truth is that if they actually forced them to pay, they'd lose their biggest barrier to entry.
You're right, the third world doesn't gain their bottom line. But if they let an alternative develop and grow popular because their prices are too high, it could seriously hurt their bottom line where it matters - in the rich countries. That's what this is all about, what they are trying to prevent.
That's also why threats of moving to Linux is so effective - the more people are on Linux, the more the rest can threaten to move to Linux. So it's probably cheaper to buy them off than to increase the Linux userbase and make the switchover threat worse. They sacrifice a little profit to keep their monopoly, because that is what matters in the greater picture.
Kjella
Live today, because you never know what tomorrow brings
I can't see Microsoft ever making any significant profit there.
You are probably right, since their is no money to be made there then by giving away licenses, they are not loosing the money that they would never get anyway. In addition, by getting people on windows they are keeping people off alternatives.
Microsoft is obviously doing this just to hook the third world. Its not like they, nor Bill Gates have ever made any charitable donations before, right?
Maybe one day slashdot will get rid of Michael and will slowly become a respectable news source again.
slashdot, news for crazed liberal socialist zealots
If you like, I'll give you $1000 worth of software - it's easy because I can arbitrarily set the "value" of a trivial chunk of code at $1000 and be no different that what Microsoft is doing here. This is why Microsoft likes to donate software or vouchers for software (most which usually come back to them) instead of cash.
This Reuters story in the Toronto Star puts a different spin on the numbers. I assume that they're both using the same numbers?
One line blog. I hear that they're called Twitters now.
MOD PARENT DOWN!! IMPERSONATION!
Look closely at his name! RAY_R_NOND? looks like raymond but spelled rayrnond. See it?
See the FAQ
I have re-posted this AC comment because it needs to be seen, and someone has modded it down unfairly.
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.
Free software gives Microsoft a lot of exposure. Some of the worlds largest markets (read: most populous nations) are third world. Since people will have the product, they'll learn it, and likely develop the same dependance as is seen in North America today. (Ever try to use Lotus Suite after 6 years on MS Office?)
Eventually, the economy in these nations picks up, and people start paying massive amounts of money for software upgrades and support agreements.
Good long term potential earnings.
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'?
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.
The people who run this web site are not journalists by any stretch of the imagination. They never were, and they never will be. The only one to come remotely close to that description was Katz, but he was so far gone to the left that it didn't matter.
I agree with what you're saying, but I cringe whenever someone accuses them of "shoddy journalism" - that's an insult to real journalists everywhere. Instead, they should be criticized for running a web site that unfortunately commands the attention of millions of people all over the world and knowingly appending their snippy comments to stories submitted by other people in order to sway the opinion of said millions (ok, maybe thousands).
Being a "perl hacker" (whatever the hell that means) and hitting the jackpot by accident does not make you a journalist anymore thatn learning to hack a weird scripting language makes you a professional software developer.
Namibia said "Screw you!" and kept on using Linux.
Microsoft is obviously doing this just to hook the third world. Its not like they, nor Bill Gates have ever made any charitable donations before, right?
Donating cold, hard cash is charity.
Donating product is promotion, pure and simple.
Spinning it as "charity" is disningenuous, dishonest, and quite frankly an insult to our intelligence (not to mention an insult to everyone who does make real, legitimate financial donations anywhere).
Maybe one day slashdot will get rid of Michael and will slowly become a respectable news source again.
So, in other words, Michael isn't up to Microsoft Shill standards?
Microsoft is trying to "hook" the third world. As anyone with any experience with computers (who is not a Microsoft shill) will attest: once you are running on one platform, switching to another is difficult even if the playing field is level. Add to that Microsoft's long, well documented history of customer-lock-in strategies and techniques ranging from deliberate sabatoge of competitor's products through mucking with DLLs (Netscape, DR DOS, etc.) to outright strong-arm tactics ("use Netscape instead of IE and will treble the price of your licenses!"), couple all of that with Microsoft's typical monopolistic pricing, and the only rational conclusion anyone not shilling for Microsoft could reasonably reach is that they are, in fact, trying to promote their product in the third world and thereby lock in new customers, making it difficult for them to consider competing alternatives (e.g. FreeBSD, Apple, Linux).
In the Common Tongue we call that "hooking" the customer.
The Future of Human Evolution: Autonomy
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
I suspect that this is a spoiler for Open Source like OpenOffice, Apache and the likes of FreeBSD or GNU/Linux.
If its basic computer skills then you don't need any Microsoft software but any old PC like the junk we in the 3rd world typically toss out (you know all those P-300 and lower PCs.
I want to know is
a) what the hell they would be powering these PCs with ! and
b) how will Microsoft actually help the very poor rates of literacy in the females in Afganistan. Since the US got rid of the Taliban very little has been done to help female literacy. Female literacy is an essential part of the general children literacy rates as the females of the family teach children from an early age at home basic skills prior to formal schooling.
I still think that the 3rd world need the basics to survive not some 3rd rate software that has an inflated sticker price and can easily be replaced by alternatives at a zero price point. Anyone who thinks that GNOME/KDE is not desktop ready is talking sh*t. As for server technology then any typical Linux magazine cover CD has Apache, PHP, Perl, Linux, Postgresq/MySQL, Python.... You can get more software from some old Linux magazine at a newspaper stand than you'll ever get from Microsoft on their gift programs.