Slashdot Mirror

← Back to Stories (view on slashdot.org)

Microsoft Should Dump Middlemen, Build Own Phones

Posted by CmdrTaco on from the i'll-do-it-myself dept.

suraj.sun writes "Microsoft has a long and illustrious history of operating system sales. The model has served the company well on the PC, but if it wants to make money in the phone market, it needs to start thinking like a consumer electronics company and start making its own phones."

20 of 262 comments (clear)

  1. In other news by Dunbal · · Score: 3, Funny

    Microsoft's search for a viable business model continues.

    --
    Seven puppies were harmed during the making of this post.
    1. Re:In other news by Xest · · Score: 3, Interesting

      Personally, if I had a choice, I'd gladly take Microsoft's non-viable business model at $18bn profit in the last year more than I'd take any other technology company's as that's over double Apple's profits and nearly triple Google's profits.

      Microsoft's got a perfectly viable business model, such that it's still consistently slaughtering the competition in the technology market in terms of profit they make year on year- I think IBM is the next closest at around $12bn and HP 3rd at about $9bn, although I could be wrong, I've not been paying attention to all of them.

      The issue is simply that Microsoft is struggling to grow their market even more, not that they don't in fact make fuck loads of profit, and have a metric shit ton of assets and equity. The fact is it can do things like the Kin, the Zune, the XBox, and whether they flop or not is irrelevant when they're still pulling in more profit than any other technology company out there from the profits of their core business. If however one of their adventures does turn out to be a hit then great, they've widened the gap even more, if not, then, well, their lead in terms of profit is still pretty massive and even Apple and Google's resounding successes in comparison over the last decade haven't even come close to closing the gap. Unless Microsoft has a secret oil drilling operation that's going to explode due to poor maintenance in the gulf of Mexico soon then there's not too much that'll change that in the forseeable future. As a company, financially, they're still a behemoth, and are as solid as a rock.

    2. Re:In other news by NatasRevol · · Score: 3, Insightful

      Microsoft is a software company, therefore they have 90% profit on sales.
      Apple is a hardware company, therefore they have 40% profit on sales.

      That's why, in spite of their revenues being about the same, MSFT makes more profit.

      However, AAPL's revenue is going up at a MUCH greater rate that MSFT. AAPL will pass MSFT in revenue this next quarter, and probably pass them in profits in the next year.

      Where do you want to be?

      --
      There are two types of people in the world: Those who crave closure
    3. Re:In other news by Xest · · Score: 5, Insightful

      Lots of companies have higher revenue but so what? Have you never heard the following saying?-

      Revenue is vanity
      Profit is sanity
      Cash is king

      If Microsoft is getting more profit from it's revenues then that means it has a better business model, and as Microsoft has both higher profits and more cash Apple's increase in revenue, like it's market cap, is largely meaningless. It'll only matter when Apple overtakes Microsoft in profit and equity and assets, until that point Microsoft is still the more solid business.

      To illustrate the point, Dell has a revenue of $53bn but a profit of only $1.4bn. By your logic the fact Dell has a revenue around $10bn higher than Apple it's a stronger company, but the profits tell a completely different story. I think you'd be hard pressed to find anyone who believes Dell, despite it's high revenue is a better bet when it has such vastly lower profits and vastly lower assets and equity.

      Besides, your assertion that Apple's revenues being about the same as Microsoft isn't even close to true anyway, there's about a $20bn gap with Microsoft at $62bn and Apple at around $42bn and Microsoft's latest results showed them with more revenue than Apple too meaning Microsoft are in fact widening the gap.

      Even if Apple do close the revenue gap they still don't have the profits gap closed and still don't have the assets or equity of Microsoft.

      So as for where I want to be, well, I'd still rather be where Microsoft is- higher revenue, higher profits, higher equity, greater assets, and not even losing ground in those metrics.

      If I were you I'd get a little better understanding of what revenue actually is, what profit is, what equity and assets are and what they mean for a company. Further, you also seem to have a confused view of the importance of quarterly revenue, for example, you suggest that Apple might pass Microsoft in revenue next quarter, which is certainly a possibility, but by how much? maybe in the absolute best case by a couple of $bn but they've got a $20bn gap to close across the year so they'd need to jump at least $5bn ahead every quarter from their current position of being behind, and once they've done that they've got to go from turning $1 in 5 of revenue into profit, down to $1 in 3 into profit which is where Microsoft is, and then building equity and assets takes time. All this for them to even catch up with Microsoft, let alone overtake it.

    4. Re:In other news by Xest · · Score: 4, Insightful

      "And you should get a better understanding of hardware profits vs software profits. Because you don't really seem clued in at all on this."

      I'm not sure what you're suggesting I don't understand? That software nets more profit? yes, as I said, I get this, which makes it a better business model for achieving profit. Reality doesn't give a discount to Apple and say "Oh well, okay, so you made less profit, that's okay, we understand the profit you did make was made on hardware so obviously we'll give you an extra star for this". The fact is, Apple makes far less profit.

      "And look at the last quarter for MSFT (16.1B) vs AAPL (15.7B) in revenue. That's about the same in my book. And AAPL will be above MSFT next quarter."

      So you can see the future can you? No really, you may turn out to be right, you have a good chance, but so what? Read what I said, they need to be $5bn ahead next quarter, and then maintain it for the whole year, and then convert a much larger portion of that from revenue to profit. They aint going to achieve that, no company in history has made such a big leap and Apple despite Steve Jobs' scattering of magic wont be able to achieve it either- it's a long slow process, they may overtake them eventually but it'll be years. You seem to go on about hardware vs. software profits, but again here's the point- Apple can't increase it's revenue to profit conversion when large amounts of it's profit are on hardware so they need a massive boost in software to catch up- that's nowhere in sight, Apple admitted themselves that iTunes and the app store isn't a good money spinner and barely breaks even.

      "Also try looking at growth patterns. MSFT flat, AAPL up. Pick any time frame in the last 10 yrs or so."

      You're good at making stuff up, I'll give you that. MS are increasing too, certainly not at the rate of Apple, but increasing and most definitely not flat- their last quarter was their record ever profit for example which you know, means an upwards trend.

      But here's where you're going wrong, you're assuming Apple can continue increasing at the rate they are indefinitely, that's a hell of an assumption to make. Rapid growth from the underdog is difficult but possible and Apple proved it as did Google, but the saying it's tough on top is very true- as Apple get bigger, they'll start to find things harder and will plateau off themselves.

    5. Re:In other news by crmarvin42 · · Score: 3, Insightful

      Here is where you are correct:

      – Profits are more important than Revenue
      – Profits are profits, doesn't matter whether they are from HW or SW
      – Microsoft has greater profits than Apple still
      – Both companies profits are increasing
      – Making assumptions about the future is risky

      However, I think that in the case of Apple vs. Microsoft predicting that Apple's profits will out grow Microsofts profits in the very near future is a pretty safe prediction. Here is one of the "Chart of the Day" charts showing quarterly profits from both companies. Microsofts profits are increasing in a roughly linear fashion. There is a certain amount of noise in their line, but I would expect a significant linear trend if we were to run the statistics on their quarterly revenue. For Apple on the other hand, their growth in profits is exponential.

      Whether you like their products or not, and many here on /. don't, it is obvious that Apple has captured the consumers imagination with their products in a way that no other PC manufacturer, or consumer electronics company has. All of Apples divisions are turning a profit, whereas only some of Microsofts are. Those they have that are profitable are insanely so, but they are wasting a lot of their effort on projects with little evidence of ever being money makers in their own right. Apple has managed, thus far, to pick only winners for those things that they bring to market thus wasting less of the profits they do make on ultimately futile R&D.

      The only way I see Apple's growth slowing appreciably is if they make a major misstep, which could happen. According to some the whole "Death Grip" issue is such a misstep. I don't believe it is bad enough, but if they make too many more their house of cards could come tumbling down. They have a growing macintosh division, the iPod (still dominant), iPhone (still desirable and growing), and iPad (Demand out pacing supply for the foreseeable future). Even the death grip doesn't appear to have affected sales that I've seen.

      The only way I see Microsoft's growth increasing is if they start doing more things right in divisions that are current break-even or loosing money. That means taking some of their R&D projects and turning them into profitable products people actually want. They've demonstrated over the last decade or so, that they are essentially incompetent at this translation step. You can argue that their vaporware announcements have been everything they claimed they are, but unless it can actually be purchased it is essentially pointless. Maybe Balmer will be replaced with someone that actually understand technology and can steward products from the R&D department to store shelves. Unfortunately though, I don't think that will happen soon. Balmer and all of the other board members at Microsoft know each other too well. And as you say, no one makes more money than Microsoft. However, how much money could they be making if they turned even 1/10th of their R&D projects into moderately successful commercial products?

      --
      Bureaucracy expands to meet the needs of the expanding bureaucracy.-Oscar Wilde
  2. Re:That could work like the xbox by vwjeff · · Score: 3, Insightful

    I want to see a red ring of death on a phone.

  3. Ehr, no. by miffo.swe · · Score: 3, Interesting

    Microsoft do not have engineering talent nor software talents to pull something like that off, especially not in management. No matter how good of a phone the grunts make, management will kill its potential. It has happened countless of times before and it will happen again.

    Xbox is not a success and while now making modest profits it has lots and lots of investments to recoup before giving any payment on the money spent. Its an utter failure up until today and if nothing ground breaking happens it will keep on being a third rate console.

    The only way Microsoft could succeed is to break out a mobile team and totally isolate it from any managment and Microsoft itself. Even when they buy an excellent and complete product like Danger they still manages to wipe it off the planet my mismanagement.

    Im also not so sure being a top down shop like Apple is good in the long run. Those kinds of companies tend to stiffen up and become stale and slow pretty fast when given enough market share.

    --
    HTTP/1.1 400
  4. Hasn't Microsoft just done this with the Kin... by Fraggy_the_undead · · Score: 5, Insightful

    ... and failed spectacularly?
    And seeing how the "make the OS, leave making the phone (mostly) to others" business model seems to be working rather well for Google, I don't see, why it shouldn't for Microsoft.

    1. Re:Hasn't Microsoft just done this with the Kin... by msauve · · Score: 5, Informative
      Yes, but they should still do it because Peter Bright, the author of the article, is a multi-multi-billionaire who made his money in consumer electronics. Wait, that not right, his bio tells us:

      Peter Bright dropped out of university after about five minutes to work as a programmer. He now lives in London, where he enjoys trolling, reading 4chan, gorging on burritos, and musing about the future of Microsoft.

      So, never mind. He's just another Internet person with an opinion which isn't backed up by either knowledge or experience.

      --
      "National Security is the chief cause of national insecurity." - Celine's First Law
    2. Re:Hasn't Microsoft just done this with the Kin... by Bill,+Shooter+of+Bul · · Score: 4, Interesting

      Danger was purchased by MS and tasked to build the kin. It wasn't a project that they bought fully featured like google did with android. The Kin was fully developed form concept to launch while the former Danger employees were under microsoft. Engadget has the whole scoop of internal politicking at MS that led the the demise of pink/kin if you want more of the details. BUt win7 phone is a go, they would be really dumb to change directions, yet again and go it alone. They've already made too many changes in plans that have lead them way behind.

      --
      Well.. maybe. Or Maybe not. But Definitely not sort of.
    3. Re:Hasn't Microsoft just done this with the Kin... by stephanruby · · Score: 3, Informative

      http://www.engadget.com/2010/07/02/life-and-death-of-microsoft-kin-the-inside-story/

    4. Re:Hasn't Microsoft just done this with the Kin... by DrPizza · · Score: 5, Funny

      I might not be a multi-billionaire.

      But I also didn't buy Danger for $500M, run it into the ground, and then post a $240M write-off last quarter for KIN.

      So I must be doing something right, I guess.

      Microsoft may be successful. Microsoft's phone efforts are not.

  5. Re:That could work like the xbox by Konster · · Score: 5, Funny

    RROD on the back and BSOD on the front.

    Very stylish!

  6. Yeah by Bertie · · Score: 4, Insightful

    Just look how well designing the XBox 360 without the requisite expertise worked out for them...

  7. Re:That could work like the xbox by GrumblyStuff · · Score: 4, Funny

    So they'll sink $4-5 billion building hardware, software, branding, and (presumably) a market/network? Yeah, maybe.

    Or it could be a Zune phone, replete of velvety brownness and the ability squirt.

    Actually, it would be fun to see them flop about in a costly and humiliating manner. Sure the Xbox has turned a profit for some select quarters but I reckon they're still down a few billion overall. Does anyone know how the Zune is fairing?

    I, for one, welcome Windows Live 7 Professional Phone Xtreme Crispy Chunky Ranch-Bacon. If it worked for Vista and Hotmail, well, they could work similar magic with a homegrown phone.

    (We can still make fun of Vista and Hotmail, right? And what the fuck is with those Hotmail ads? They make less sense than the Seinfeld ones.)

  8. "Microsoft has a long and illustrious history ... by QuietLagoon · · Score: 3, Insightful
    Microsoft has a long and illustrious history of operating system sales.

    .
    Here, let me fix that typo for you.

    "Microsoft has a long and iniquitous history of operating system sales."

  9. Re:That could work like the xbox by samkass · · Score: 4, Insightful

    Given that the xbox has done rather well for them

    Only losing a couple million dollars is "rather well"? The XBox sells well because it's subsidized by the Office and Windows monopolies, but it's not exactly a profit center.

    --
    E pluribus unum
  10. Re:"Microsoft should..." by larry+bagina · · Score: 5, Funny

    I remember when dumb ideas from unimportant losers was reserved for the comment section.

    --
    Do you even lift?

    These aren't the 'roids you're looking for.

  11. Clippy by bsandersen · · Score: 4, Funny

    Hi! I'm Clippy! Microsoft Bob is not available. You could leave him a message if you like. Just hold down the #, *, 7, and 3 keys. It looks like you are trying to make a call. Would you like me to help with that? I see you've dialed a 9. There is an area code "978", can I finish dialing that for you? Oh, I see you've now dialed a "1". You might be trying to make an emergency call. I could... ** REBOOT ** Hi! I'm Clippy! Microsoft Bob is not available right now...