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Microsoft Posts Record Earnings
sriram_2001 writes "Microsoft has just had a record quarter where their profits have doubled from the previous quarter. Total sales are at $10 billion, exceeding both internal and external expectations. Microsoft has attributed the rise in earnings to increased server sales (where *nix-based systems are supposed to be doing well) and more XBox units being sold. For a company that most Slashdotters would say is on the decline, Microsoft sure has weird financial results!" To put it in perspective, Microsoft's income is about the same as New York State receives in taxes - below California, and well above the other 48 states.
Microsoft has attributed the rise in earnings to increased server sales (where *nix-based systems are supposed to be doing well)
Maybe it's because more servers (both MS and !MS) have been sold this year so both were profitable...
Trolling using another account since 2005.
In DEC's case, the influx of workstation-class machinery caused a weakening of the mini market. This weakening killed off all but the strongest mini maker (DEC). Customers fleeing from failing makers split themselves between DEC and the new workstation vendors, thus causing a boost in DEC's sales right before the crash of the whole mini market -- DEC peaked amongst the carnage of their market, then crashed spectacularly.
Sun's case was a repeat of the behavior. Sun's market had migrated from workstations to servers from the late 80s through the mid 90s. By the mid 90s, however, we were already seeing a market shift towards PCs acting as servers. As the server vendors' market weakened (still prior to the Internet boom) we saw diminishing workstation/server sales for many companies in that sector (e.g. HP, SGI). Meanwhile Sun's sales skyrocketed, again attributable to a split in the market where some of the people leaving failing vendors went to Sun.
Sun would have had a crash in the 1999 timeframe if it weren't for the internet boom, which dramatically increased demand for large servers. When the boom ended, however, so did Sun's fortunes -- very fast. You can see in Dell's sales where the market went.
Microsoft has been benefitting from the failing of the server vendors, same as Sun. (Though, really, the biggest winner in this is Dell.) If this were a normal hardware-only migration Microsoft would rapidly capture upwards of 80% of he market and be dominant until the next hardware shift. But it's not normal because this is the first transition where the software is decoupled from the hardware.
Microsoft should have won by default, with customers shifting from server-class systems to PCs as customers went with the default option of Windows servers. And, in fact, Microsoft did extremely well for the first several years of the transition when there really wasn't much competition in the PC space.
Linux has thrown a huge wrench in the works. It's maturing very nicely and offers the huge win over Windows in that it's both cheaper for licenses and especially for migration.
If there's any one thing we can count on in this industry it's that the cheapest thing that gets the job done wins (which I've been saying so long now I call it Jim's Law). Until Linux came along the cheapest thing was Windows servers. Now it's not. The market impact of that is going to be phenomenal.
In a typical market transition you can expect more or less equal boosting of the various competitors in the market as people flee dying companies. But in a typical market transition there is not much price difference between the competitors -- usually within 10%, as everyone attempts to maximize the market opportunity.
Linux turns that on its head by offering a scale of prices starting at zero (no support) through prices that are more or less competitive with Microsoft's offerings (full support). That gives Linux a significant market advantage.
I expect we'll see a major market move towards mid-priced systems (some support, not "enterprise class" support, call it the $500 price point). Microsoft is trying hard to push for higher prices in that market just as Linux is depressing them.
If things continue the way they are going I would expect Microsoft to peak in the next one to three years at perhaps 65% of the market (by units) as the migration from server-class systems to PCs-as-servers completes, and then fall over the following five years to about 30% of the market as people migrate to more cost-effective Linux solutions.
But Microsoft won't take this laying down, they'll start reducing prices to match those of the midrange Linux products (more on that in a minute), to whatever degree they can afford. As such I think we're going to see the products come very close to price parity and we'll see Windows stabilize at 40-45% market share with
jim frost
jimf@frostbytes.com