Netbooks Take a Bite Out of Windows Profits

twitter writes "Analysts at Bloomberg noticed the tumble in Microsoft's traditional software sales last quarter and blamed it on netbooks: 'The devices, which usually cost less than $500, are the fastest-growing segment of the personal-computer industry — a trend that's eating into Microsoft's revenue. Windows sales fell short of forecasts last quarter and the company cut growth projections for the year, citing the lower revenue it gets from netbooks. When makers of the computers do use Windows, they typically opt for older and cheaper versions of the software. Equipping Linux on a computer costs about $5, compared with $40 to $50 for XP and about $100 for Vista, according to estimates by Jenny Lai, a Taipei-based analyst at CLSA Ltd.' This is why MS declared war on the segment last year and palm top computers in previous years. While they may have successfully tamed the Asus EEE PC, they can't hold back everyone who wants to make a buck on cheap hardware and free software. Analysts have predicted the fall of MS's business model when computers break below $250/unit retail. We are there now, and it has shown in the bottom line."

Comments

Why make it more complicated than it really is?

[schnikies79]

The economy (U.S. and the world) has slowed. Why would Microsoft be bucking the trend?

Re:Why make it more complicated than it really is?

[Lumpy]

Because it really is a part of a trend. I just got one of the el-cheapo Acer Aspire one. It's got a 160gig drive, a dual core processor, a 1024X400 screen that is brighter than any laptop I have ever seen (LED instead of the crappy CFL as well.

This thing is really fast, really small, and cost me less than $350.00 at WALMART of all places. It does more and has better specs than my new Dell laptop from 2 years ago and cost 1/4 the price.

Microsoft better be scared, because the high end one like this has XP on it and not vista. and that is how it was marketed to me, "you want these laptops because they do not come with vistal.. Vista is something you want to stay away from."

Yes it's walmart, but even if the minimum wage know nothing about computers sales guy at walmart is telling people that vista sucks, then it is hurting microsoft... And I bought the high end aspire one.. most of them come with linux (a variant that sucks) and with ubuntu having a distro coming out just for these tiny pc's that is brain dead easy to install from a thumb drive, I can see joe sixpack installing ubuntu on his new pocket sized laptop he got for cheap.

Re:MSFT goes SaaS?

[jonbryce]

People are not going to pay for updates. It is difficult enough to persuade people to load updates when they are free.

Re:MSFT goes SaaS?

[fuzzyfuzzyfungus]

I'm not sure that SaaS can save them from this problem. People are fairly willing, these days, to pay monthly subscription fees for services, so there isn't an inherent psychological problem; but windows netbook $250 + $10/month vs. linux netbook $250 + $0/month is going to be a hard sell. Perhaps worse, though, is the interest cell companies are showing in selling subsidized netbooks with data plans. If the netbook+monthly fee thing becomes a telco standard, the MS will face the unpleasant prospect of having to play knife-fight-in-a-telephone-booth with the notoriously mean bloodsuckers at the telcos over exactly how much of the customer's monthly fee with go to them and how much to the cell guys.

Ultimately, though, it just comes down to the fact that cheaper hardware demands cheaper software. 50 or 100 dollars for windows is noticable; but not hugely important in a $2000 computer. 50 dollars for windows on a netbook probably means the difference between impulse purchase and not. I don't think that this will affect MS's market share directly, they can afford to give away XP for netbooks until the end of time, if they want to. Their margins, though, will suffer, and that could be quite serious for some of their divisions. Being able to start a project and let it absolutely hemorrhage money for years if need be gives MS impressive strategic freedom. If their margins on Windows and Office suffer, they won't be able to do that anymore.

Re:The troll, the legend

[RiotingPacifist]

But Microsoft don't make much money on home sales or oem sales (its something like $10-$20) they make their money on corporate sales, which are unaffected by the netbook trend. So this article IS just twitter bullshit.

And this isn't the 1st time timothy has been caught.

Re:People know what computers are now

[steeleye_brad]

and people know how to use them.

After working for a university help desk, I can tell you with a great deal of certainty that this is quite false.

And I still think of a directory as a "folder" because pretty much all of my software refers to it as that. All the icons are of little folders, my file manager has a "make new folder" command, lots of programs I use have a command along the lines of "open folder". You know, maybe this is just proving that I'm some sort of "child clinging to my woobie," but I'm honestly not sure what the hell any of your points are.

Re:You should not.

[David Gerard]

180 million sales! And at least some of those were actually activated and are actually in use!

Microsoft have the precise number of Vista machines in the wild - it's the number hitting the Windows Update servers. But they don't push that number, they push the "licenses shipped" number, which is meaningless in a world with legally allowed XP upgrades.