Regards, Ivan
Posted on 11/18/2002 6:13:09 AM PST by MadIvan
Microsoft has revealed for the first time that it has made profit margins of 85 per cent on its Windows system while its remaining businesses made losses, raising questions about the benefits of the group's costly efforts at diversification.
The client division, which markets Windows, generated operating profits last quarter of $2.48bn (£1.57bn) on revenues of $2.89bn, implying margins of 85 per cent.
The disclosure of its profitability, released in an SEC filing late last week, will infuriate many rivals. Microsoft was found guilty of illegally maintaining its monopoly in personal computer operating systems in 2000.
A subsequent settlement between the Department of Justice, nine US states and the company was widely criticised as being too lax.
Nine other US states attempted to have greater constraints placed on the company. But on November 1, their proposals were largely ignored by the district court in Washington DC, which formulated the eventual remedy and almost all the DoJ settlement.
Among Microsoft's other businesses, the home and entertainment division, which includes the Xbox games console, lost $177m in the quarter on revenues of $505m. Salomon Smith Barney estimates the company loses about $120 on each console it sells.
MSN, the internet service provider and portal, lost $97m, down from losses of $199m in the same quarter last year, on revenues up from $431m to $531m.
The business solutions group, which provides software for small and medium-sized businesses and includes recent acquisitions Great Plains of the US and Navision of Denmark, lost $68m on revenues of $107m.
And the CE/Mobility division, which includes mobile telephone software and the Windows CE operating system for handheld computers, lost $33m on revenues of $17m.
Bill Gates, Microsoft's chairman, speaking yesterday in Las Vegas at Comdex, America's largest information technology conference and show, warned that investors and pundits were becoming too pessimistic about the prospects for innovation in the industry.
Although the IT industry was struggling, the rate of innovation and the industry's rate of growth were being underestimated, he argued.
Mr Gates said a transition was taking place in which the personal computer was becoming less important than personal computing.
Regards, Ivan
I'm sure Bush2000 will be along to tell you about how it's not a bug, it's a design feature and that anyway Linux is worse. ;)
Regards, Ivan
How are these margins calculated? Do they include the costs associated with developing Windows in the first place?
I'm not a real big fan of bill or his software, but this sounds like the complainst about pharmaceutical companies- "this drug costs $.05 to manufacture! How can they justify selling it for $5?" Well, it cost $500 million to develop it and get it through the FDA...
I suspect this varies heavily depending upon what part of the production cycle the current versions of Windows are in. Punching out copies of Windows isn't nearly as expensive as developing it.
Now look, he is losing money on X-Box (hardware) LOL.
Anyway, here is my most recent MSFT story and it has a good ending. I recently bought a computer that was a Clone built by a local computer shop, it came with XP pre installed, it was complete with the license and all that.
I got home with it, and hooked it up and logged in maybe 3 times and the OP system froze and would not let me in.
Called MSFT Tech Support they said that the OEM (builder) had probably used it to install to another computer, and the time ran out on the license registration, therefore I was out of luck, (I paid the builder $59 bucks to unlock it).
I went back to MSFT tech support and they said there was nothing they could do to reimburse me, but I finally talked to a Call Center Supervisor and they gave me XP OFFICE finally.
Bottom line, Microsoft did me a good turn, and I appreciate that.
Doesn't sound so innocuous now, does it?
No offense to anyone, but...
Duh.
This is exactly what one would expect, economically speaking, from a MONOPOLY.
Microsoft never considered making money on the Xbox hardware. They planned to take a hit on the cost of hardware in order to get the price down and make sure plenty of units were sold. Xbox is a longterm project. Where the money on that venture is going to come from is licensing of software for it and subscription fees to the WAN multiplayer. Console and PC gaming don't get the press of Hollywood, but they bring in more loot. Bill just intends to ride that wave.
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