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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,
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.
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.
"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
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
What they're talking about it unearned, they mean contracted or obligated but unpaid. Like if you buy something on a lease and don't have to pay for 90 days or better yet sign a contract but you don't take deliverables until 5 months into the contract. Simple GAAP rules. -Scott PS. Sorry 'bout being off topic.
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...
from the article:
Look here for previous "charitable donations" that were actually marketing trojan horses that ended up being too expensive for the recipient..
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.
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.
In this particular context, it would include people who have signed up for Microsoft "software subscription" program. Declining unearned revenues mean that there aren't as many people signing up for their subscriptions as they'd hoped.
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.
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."
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?
Please correct me if I'm wrong, but: The desktop OS/Office Software market is not your typical 2-3 major-player market. Microsoft is a convicted monopolist with over 90% market share. This is not an offer of help, this is a predatory offer to stop 3rd world countries from adopting Open Source Software.
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
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.
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.