Slashdot Mirror
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."
The economy (U.S. and the world) has slowed. Why would Microsoft be bucking the trend?
Gone!
They are salivating while trying to make it work. Their MOLP"s are almost that and part of their core revenue stream.
---- Booth was a patriot ----
People are not going to pay for updates. It is difficult enough to persuade people to load updates when they are free.
I stared to a Asus Eee thing a while ago running Windows XP. Just the idea of running XP on that machine along with Antivirus, Firewall and only the software updates horrified me.
If the companies put XP as option to them, it is not like they are getting it free (or dirt cheap), it is because they are very afraid of Microsoft.
If you are World's one of the most respected mainboard manufacturers (Asus) and you started to gain ground with your Laptops, you don't want to make Microsoft mad. MS can provide a single buggy driver update and create chaos in your customerbase. All they need to say "oops" after it. Customers will blame YOU, not them.
The children are not paid to install the software on the machines.
They are paid to drag the crates of machines up out of the mine.
liqbase
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.
$400 for Windows is too much, the OEMs pay much less.
Also the last thing I need is another monthy bill. I have a Trac Phone to avoid that (could easily afford the iPhone but not justify the monthly rate). My used car is bought outright. Other necessary bills minimized, especially in this economy. Etcetera.
Once windows becomes subsciption: it will either be structured in such a way (updates as you describe) that most people don't bother thus lose money anyway, or many people start migrating away which is exactly what they don't want. It would be the beginning of Linux as a mainstream desktop OS.
While twitter may be a PITA,and his talking to himself with sockpuppets is just....well,it is pretty obvious the guy needs mental help, this does point out something I've been saying for a long time: MSFT is pricing their goods WAY too freaking high! $99 for XP Home? $199 for XP Pro? Is there ANYBODY else who charges THAT much for software THAT old? The MSRP retail hasn't changed since it came out in '01! And then they total crazy BS of Vista,with its,what? Six different versions? And the cheapest one is STILL $100? Totally freaking crazy.
If MSFT doesn't want to get their asses handed to them they better learn to accept normal profit margins on their software. Not to mention giving the public what they want. I mean,have you EVER heard of any other company killing off a product that was still selling quite well after 7 years? Most companies would kill for a product like that!
Mark my words: The netbooks and nettops are going to take up a serious chunk of the lowend. Because with even a half ass GPU added(so they can play High Def vids) they will do everything your average Joe wants to do with his machine. Last year when I walked through the college I saw full size laptops everywhere. Now I see very few full size while everyone has a netbook sitting on their lap. If MSFT doesn't learn to take a normal profit like everyone else then the custom Linux distros like the EEE Xandros(which is the most popular model at the local college) are going to seriously kick their ass. After all,they have a couple of years old desktop at home to run their Windows software on,so why should they pay so much more just for an old MSFT product?
ACs don't waste your time replying, your posts are never seen by me.
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.
IranAir Flight 655 never forget!
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.
> Microsoft could charge $10 to OEMs (maybe $50 retail) upfront, then require a subscription to get updates other than security updates.
Yea, it could. But they currently get $32 for XP on a netbook and as much as $80 for a basic Vista. Big OEMs like Dell pay less (exact amount secret) and some machines that ship with more expensive versions of Vista pay more. The point being that even if your idea could work it would be a fatal hit to their bottom line. If they can't tap people for at least $5 a month a subscription model is going to be seen by Wall Street (rightly) as a lot less profitable than the current model.
The problem is that the only way people might pony up that kind of coin is they actually get something major, not just fixes to product defects. Even giving access to every Microsoft non-game product wouldn't induce many people to put up with a monthly subscription.
> I'd rather pay $50 upfront and then $10 per month for four years than pay $400 upfront at retail.
If they could still clip people for $50 up front they would have a future. Good luck convincing an OEM to put a $50 component into a product destined to retail for $200 or less. That is the world that is coming and it terrifies Microsoft. As the hardware cost for a basic network node approaches zero the software cost must do likewise, the days of selling the basic operating system, browser and office suite are coming to a close. And as computers become consumer electronics the reality of that transition is just being realized by the soon to be former PC makers. So both the current hardware makers and Microsoft are desperately trying to find some way to survive and would just love to transition to a subscription model in some sort of joint venture with the telcos/ISPs. Laptops/netbooks might end up tethered to a cell modem and a monthy bill but neither Dell nor Microsoft are needed by the telcos. They would rather buy the machines direct from China themselves and pocket the profits.
> On a netbook, I think it wouldn't be unreasonable for Microsoft to offer something like Box.net on-line storage/backup
> as part of the subscription..
Pay for a net based service? Surely you jest. ASUS is already giving it away for free now.
Democrat delenda est
Monopoly, meet perceived value.
Before MaBell was broken up, only Bell System phones could be connected to the phone line. And they charged arms and legs for that phone. Why? One, you didn't have alternatives, and two, if they charged too little, then customers wouldn't appreciate the service as much.
The price of something has very little to do with cost, especially in software. How much is an accounting program worth it to you? How much is it worth to a business? What if that software cost $20,000, and runs only on Windows with no alternatives? $200 is cheap in comparison.
Add to this the fact that OS is bundled with the computer (no direct means of perceiving the cost), it's very wise to set the retail price high. See, our product must be good to cost that much.
As much as I like GNU/Linux (3/4 of my boxes boot Linux), for most people, it's worth paying the $100 -$200 to get an OS that runs all the other popular software.
In Soviet Russia, articles before post read *you*!
It's slashdot, don't take it so seriously. You're allowed to say M$. You're allowed to hang out here when the pub's shut and there's nothing on TV.
Vista is a failure by most standards and Microsoft's OS monopoly is gradually being eroded. This recession is helping.
Vista only "sells" because PeeCees come with it installed by default. Don't kid yourself that the situation has changed in the last few years. MS still has a monopoly and uses every dirty trick in the book to keep competing operating systems off of new machines.
Also, remember that a substantial proportion of new (Vista) machines get reinstalled with Windows XP legally or not.
Never mind, the future is bright. Windows 7 will come with 256 threads, comrade. Double-plus good!
My Communist-Anti-American-Virus-Cancer Linux PeeCees eat 256 threads for breakfast. So do my All-American Sun SPARC/Solaris boxes. 10 lines of C says so.
I don't like Microsoft, and I hate Windows. Bill Gates, Steve Balmer et. al. are a bunch of crooks. I'm human, I have opinions. Twitter's cool. It's allowed opinions, and it's nice to see them amongst the pro-M$ apology this site has become.
Stick Men
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.
http://rocknerd.co.uk
Some companies do that when they feel that they need to make progress and their current product is holding back. Apple did it when they killed their iPod mini line even though it was their best selling line of iPods. Apple could see that flash was the wave of the future for smaller MP3 players and moved towards it. Unlike MS, Apple provided a better product at the same price. MS provided a product that was superior in some ways and inferior in others. However the cost was higher factoring hardware requirements. For those upgrading on older machines, Vista was not an improvement.
Well, there's spam egg sausage and spam, that's not got much spam in it.
My Linux-based eee 901 is the best computer I ever had. The Atom chip sucks compared to the multicore CPUs in my other computers. Its SSD is tiny compared to massive 1TB drives I have in other computers. Its graphics capabilities suck compared to my game desktop. But (a biiig but) it is so
lightweight that I carry it with me all the time, and the battery lasts me a full day! In a month I have been assimilated and now am part of the
symbiotic Me-and-my-EEE borg. It is amazing to be able to have a real computer with me even in the toilet. The Nokia 800 tablet was the closest I got before to this but it was not a full-capability computer, and it showed. There is reason for Microsoft to be scared because they see resistance will be futile. I sometimes walk while typing on my EEE without fear of breaking my hard drive. I always drive with my EEE on the dashboard. More powerful netbooks miss the whole point. They are just laptops, maybe cheaper and less heavy, but not good enough for assimilation.
It's kind of ironic how it's been the Chinese who have been financing so many Americans to be able to live beyond their means as described above.