Robert Pogson

One man, closing all the windows.

That M$ is Dying

  • May 18 / 2011
  • 22
technology

That M$ is Dying

One of my visitors accused me of irrational belief that M$ is dying. Of course, we all know, M$ makes $billions every quarter directly from sales of licences for that other OS but it’s

  • not making much on search,
  • not making much on ARM (Lose CE excepted),
  • had a drop in revenue while almost everyone else in IT had serious growth, and
  • Android/Linux on ARM could well be shipped on 200 million+ smart phones and tablets and a few other smart thingies this year.

So, something is dying, the monopoly. This year or next, that other OS produced by M$ will ship on fewer personal computing devices than Linux will. We saw how a few million netbooks dented M$’s monopoly. They lost a $billion promoting XP for netbooks keeping XP alive just for that purpose. What will hundreds of millions of smart thingies running Android/Linux do???

Not only has the monopoly lost any sign of growth, Linux in various forms continues to invade the traditional areas of the Wintel monpoly both on clients and servers. So, “the cancer” has metastasized. It’s stage 4, almost certainly fatal to something. M$’s response, to produce “8″ for ARM as well as x86/amd64, will be too little and too late. The monopoly dies this year one way or another. We see serious products competitive with client and server that Wintel does not control. With the rates of growth involved and the ability for competitive prices to seriously undermine M$’s prices, even if M$ cuts prices to try to preserve the monopoly, all it will do is take a huge bite out of revenue. As things go, to hold off disaster, revenues might have to halve or be further reduced just to stay relevant on the x86/amd64 hardware.

The monopoly has relied on retail lock-in for decades. It’s gone. It’s dead. These small, not-so-cheap computers are flying off retail shelves as fast as they can be stocked and there is increasing growth rate…

M$ probably will not die. It can diversify and live forever on its investments or sell refrigerators or something, but it has already lost any chance of monopoly on mobile devices and that will spread to notebooks, desktops and servers. Of course M$’s main business with servers was to support its client OS. WIth its sharp decline the server end of M$’s business will also take a hit. The future of M$ is greatly reduced margins, and sharing IT with others on commonly agreed terms, not dictates.

22 Comments

  1. Meh

    The future will have a need processors and processor makers, it will still require hardware vendors and assembly lines. People seem to think of PC in regards to the electric car, unfortunately the PC is not the electric car it is what booted computing. Unless processor makers and hardware vendors of the future stop manufacturing then one could say that the PC is dead. The likelihood of that happening is zero to none, and the so called tablets and phones people buy into they are hype accelerated by fan-boys/girls/media and sold by a market with its own agenda. Yet if all that is all the rave its out to be, then why do we still have Windows, OSX and even Linux? What do these operating systems gain by being in existence? Perhaps the argument this blog tries to rectify isn’t that thought out or deep enough. I see a future where the current devices on the market will be in scrap pile in a few years and we will be back to square one where computing ought to be.

  2. Robert Pogson

    OOOOHHHH! Internet Exploder 6, the product of many years and many $billions of M$’s R&D….

    I think M$ could have a wide range of superior products with all the money they spend if they spent it on computer science instead of salesmanship and messing with competition.

    The world would be far better off to hire programmers than to pay M$’s licensing fees. That cuts out lots of executives and salesmen from the payroll.

  3. Contrarian

    PC-DOS was unquestionably inferior to Unix in terms of system capability, but the IBM PC, AT, and even the PS/2 were equally inferior to SPARC workstations and other Unix platforms. Pricing for the latter was one or more orders of magnitude greater as well.

    You describe a litany of development from DOS through Windows versions to the present Windows 7, claiming it’s continued inferiority to alternatives, but that very recital shows the constant product improvement that was being made to the Microsoft client platforms.

    Microsoft evolved with the hardware and with the times and with the public’s expectation of functionality and performance. You have to “walk before you can run” in the trite saying, and I see where Microsoft did just that. It continues to do that today and will most likely do it tomorrow.

    Linux, too, has evolved rapidly over the same time period and is a perfectly capable solution to client computing needs today. But it is only an alternate solution to that of Microsoft Windows and Windows has been the favorite for almost 20 years. If someone could profit immensely from having Linux take over the industry, a lot more effort would be put into doing just that.

    Maybe Google will have as much success with Chrome as they have had with Android in the telephone business and Google is just what Linux needs to get some recognition. What I do not see is how Google can profit from the effort. They are not in the OS business and they have already shown a lot of financial loss due to their spending tons of money on Android, which has a similar price realization non-model.

    Microsoft spends billions on R&D for their software products and gets tens of billions in revenues in return. Microsoft also spends billions on product promotions for those products. Can Google match the spending needed to promote Chrome and Android without somehow obtaining like revenues in return? I think that this question is far from being answered today.

  4. Robert Pogson

    Contrarian wrote, “forgiving of anyone so far in front of competition”.

    M$ has never been in front of the competition technically. DOS was a Frankensteinic monster compared to UNIX. Lose 9x had no security whatsover and tons of bugs besides. NT was a vast improvement but just trying to catch up with GNU/Linux of those days. XP was obsolete when it was released. 2003 was perhaps their crowning glory before “7″ but the burden 2003 placed on the network and system maintenance was ghastly. The service packs on XP/2003 were just coats of paint. “7″ is just Vista debugged and still a hassle for interoperation. That it took M$ years after a release to fix Vista is a measure of how bad the code was and probably still is.

    Networking is an essential part of computing. The network delivers resources wherever they are needed. An OS that views the network as some kind of an addition is sick.

  5. Contrarian

    My reply in regard to “residual effects” was intended to mean that I did not agree that the Microsoft litigation history had any effect along the lines, as you had suggested, that students or others who studied the antitrust cases would refuse to do business with Microsoft. I would agree whole heartedly that Microsoft’s actions over the years has had a profound effect on the industry and has shaped the very meaning of IT technology today.

    My personal opinion is not as negative as yours though in labeling all of this history as some sort of catastrophe. I think that the business, like the literay Topsy, “Just grew” and those who were servicing the consumers in the business simply followed the whims of whatever direction the wind seemed to be blowing. Microsoft has made this practice into almost an art form and continues to do so today.

    They have sometimes slipped along the way, for example by going way overboard in channeling the way that users had to approach the Vista version of Windows. Fortunately for Microsoft, the world is very forgiving of anyone so far in front of competition and Microsoft had the luxury of time to correct their mistakes. Windows 7 is a far better experience overall and balanced a lot of what Vista failed to accomplish.

    But you cannot lay the failure of other, competing technologies at their door, I believe. If thin clients ala “The network is the computer” mantra of Sun’s leader never obtained traction in the consumer’s mind, that is the fault of its proponents in failing to argue effectively or at all when presented with some opportunity to do so. If you want vindication for the concept, then the “cloud” and the software as a service initiatives by Microsoft, Amazon, Google, and IBM are proof that the architecture has some validity.

    Of course the ability to function in a network detached or otherwise dissassociated environment was the fundamental attraction of the personal computer in the first place, so you cannot fault Microsoft or anyone else for not promoting it in decades past.

  6. Robert Pogson

    Contrarian wrote, “After all, it was long ago and it didn’t even affect them contemporaneously much less produce any residual effect.”

    The residual effect of what M$ got away with years ago is

    many $billions of damages and costs associated with fighting malware because M$ did not have to ship a secure product for more than a decade,
    higher prices for the OS, far above the replacement cost, for instance, because no other OS could be sold with a PC for more than a decade,
    no ability to buy any particular hardware with that other OS or GNU/Linux side-by-side showing the price of the OS, and
    constant pressure to buy M$’s latest products for client and server even though they were not competitive in price/performance.

    Just the denigration of thin clients by M$ has cost the world dearly. A decade in which thin clients were not the major means of desktop/notebook delivery cost the world many $billions in energy wasted, material wasted, pollution and maintenance. Don’t tell me thin clients don’t work. I have been using them for six years now in schools and would never go back to “thick client everywhere”. That’s a broken model and was propagated by M$ because it maximized their profits.

    The system is slowly correcting itself but a decade or more of tens of $billions wasted in licences and maintenance and downtime is the price paid. Young folks these days are aware of the cost of stupidity in the world and are accepting change, finally.

  7. Contrarian

    If I had had some horrible experience with Microsoft I would probably do the same thing, as I do with some companies that have really made me mad over the years, AirTran Airlines and FTD Florists are the two that come to mind. Actually, I can’t think of any more than those and they ae relatively recent at that.

    Microsoft, alas, is not one of them now nor have they ever been on my “list of those who would not be missed” as the Mikado executioner recited. As to students holding a grudge due to reading about the trial from long ago, I cannot imagine that being the case anymore.

    There was a news story the other day on Nancy Grace, I believe, in regard to the Anthony trial in Florida being a bigger event than the OJ Simpson trial. It went on to sort of prove the point in terms of the news coverage planned for the upcoming trial, but there was an aside was about how few people today actually remember much at all about
    Simpson’s case. They remember about the “glove that didn’t fit”, but remember next to nothing about the actual murders or trial details.

    The Microsoft antitrust trial, I believe, would evoke even less of a memory and, given the rather tepid result, would hardly result in public outrage sufficient to affect Microsoft revenues. After all, it was long ago and it didn’t even affect them contemporaneously much less produce any residual effect. I am sure you are mistaken in your opinion here.

    As to the rest, it may come to pass that Android devices used as personal computers will take over from regular computers in enough places to really hurt Microsoft’s Windows business, but I don’t see it happening. Imagine trying to write all this text on one of those things! Would you use one that way?

    As I said before, there are hundreds of millions of feature phones, smart phones, and tablets in use today and only a tiny fraction of the web traffic is coming from them. People still use their PCs, whether Linux, Mac, or Windows, to access the internet and that doesn’t seem to be changing much. I think that, as long as there are PCs for sale in the local stores, they are going to all be Windows PCs. We don’t have an Apple store in town, so maybe that is not completely true everywhere, but it is close.

  8. Robert Pogson

    Contrarian wrote, “all the whoop-de-doo over past incidents is really immaterial in my opinion.

    Do people still love their “ex”? Do people still love the outfit that sold them a “lemon” and did not repair/replace it? Do people have such short memories that they will forget more than a decade of poorly performing software and anti-competitive dealing? I think not. There are exceptions, folks who forget…

    I don’t know anyone who has not had malware or BSODS or forced re-re-reboots and slowing down. I don’t know any business in IT that has not been harmed one way or another by M$. Many people and businesses are looking for the door. Acceptance of “7″ appears to be “good” by those who have obtained it, a minority of users of IT. Newbies who start with “7″ and think it is a “normal” OS may be satisfied with it but almost everyone else has felt M$’s noose close on their necks and they are sick of it.

    In my world, young people who have seen that other OS side by side with GNU/Linux on the same hardware both old and new appreciate that GNU/Linux is faster, noticeably, no-need-to-time-it faster than that other OS. Young people are impatient and appreciate speed. They also appreciate price. Young people tend not to be rich and will spend money foolishly but knowing that what they spend on one thing means they cannot spend much on something else. M$, by requiring exclusivity, has prevented such comparisons in the retail space but that is changing now that ARM + Android/Linux is being promoted and sold at the retail level. Consumers and businesses do now see that there are other ways to do IT. They are looking at Apple and those with money to burn are buying Apple. The vast majority will buy Linux given the choice.

    History matters. When students read what M$ did in US DOJ v M$ they are shocked that schools, businesses and consumers do business with M$. Even M$ knows people don’t want to do business with them. That’s why M$ has so many layers of partners who sell the product with price hidden and with exclusivity.

  9. Contrarian

    That is interesting. I had never seen the term before, but googling it in that context, some quotes show up with Microsoft’s usage in that meaning.

    From a business point of view, however, I think that it is still more meaningful to consider Microsoft’s businesses one by one and contrast what they are doing and might do in the future in light of the circumstances for each business they are in.

    In the specific case of the Windows 7 desktop software business, all the whoop-de-doo over past incidents is really immaterial in my opinion. All this has been through the courts and the bottom line is that Microsoft has been admonished to cease and desist various practices almost ten years ago. As far as I know, they are still allowed to offer discount prices to their biggest customers and they are being watched closely by committees established for that very purpose. Some damage suits have been pressed in various states and they have been fined in Europe.

    In any case, it is all water under the bridge and has nothing to do with what might happen in the future in that business. Your opinion seems to be that there is to be a major collapse of Microsoft’s business in this area and hence the notion that “Microsoft is dying”. I think, though, the evidence actually shows that there is very little chance of that happening even over a decade’s time.

    Lots of cell phones in use, but barely a burble in the Windows desktop revenue stream and that itself easily explained due to other macro causes in the business environment. Microsoft has even put their oar in the water in the smart phone business to exploit any such threat and has used its money and acumen to land the biggest fish in the business, Nokia, with what purports to be an exclusive arrangement. They have gobbled up Skype, too, in what seems to me to be a move that could highly differentiate their phone position by being able to unify the internet video/voice networks of Skype along with the name and the technology into the smart phone OS.

    To me that is a lot of life and no sign of “dying” at all.

  10. Robert Pogson

    “attach rate” is a term used by M$ to describe the percentage of newly manufactured PCs that run that other OS. Over the years M$ has done many things to maximize it:

    -forbid OEMs from installing any other OS but theirs or even without an OS,
    -charged lower prices for a licence for higher volume of units shipped with their OS, thus making it more profitable to ship only that other OS,
    -provide training and advertising for free or at reduced rates for folks who shipped only their OS, and
    -threatened to deny or delay software/licences to OEMs who did not toe the line.

    That was supposedly eliminated with the US DOJ v M$ but old habits die hard and as we see here in comments, much of the IT industry has internalized the idea that there is no way but M$’s and that anything else is inferior.

  11. Contrarian

    I am not sure just what you mean when you say “attach rate”. From the context I think that you are talking about the number of accesses to the internet sites being counted using Windows or Mac computers versus Linux computers or Android devices. Of course you have to count Apple iOS devices, too.

    I have seen guestimates that the totality of smart phones and “feature” phones and tables which are all capable of accessing the internet sites for news, mail, and such, is about equal to the number of computers described as “PCs”. Yet the totality of the accesses for these devices is far less than one half as the numbers might suggest if they were being used interchangeably. I believe that most people have more than one such device, for example a desktop computer, a laptop computer, and a cell phone capable of connecting to the internet and the figures suggest that they are not very interested in using the phone or tablet to do so when a computer is at hand.

    Tbe implication here is that the personal computer is not going away and so the market for personal computer OS will remain regardless.

  12. Richard Chapman

    “They also said Bing’s US search share increased to 13.9% this quarter. Although profits for that division shrunk even more, with a net loss of $726 million compared to $709 million the previous year.”

    That doesn’t look like Bing is making money, at least not for Microsoft. ;-)

  13. Robert Pogson

    They can no longer dictate to OEMs. OEMs are cranking out many millions of personal computing devices not running that other OS. Something has died already and there is more to come.

    Because they have lost a lot of “attach rate”, their share will decline within a few years in a big way. The back-up plan seem to be the web but that is not working much better than mobile.

  14. Contrarian

    Microsoft is dying, at least in the sense that nothing is forever and time is marching on, but then everything is dying. Is Microsoft past its peak, though?

    You cannot rely on individual quarterly or annual results to say, particulary in today’s economy where a massive enterprise such as Microsoft is far more affected by consumer confidence in the future than by anything that some competitor or new technology might do.

    Microsoft does not live or die on the basis of people using cell phones instead of conventional computers to access web sites. Microsoft profits from a variety of specific business segments, for example Windows client OS, Office, XBox hardware, XBox games, Windows server OS, developer tools, MSN/Bing advertising, and, more recently Windows Phone OS, and, just last week or so, Skype.

    Each of these businesses, large and small, contribute to current revenues and define Microsoft’s future. Perhaps there is some minor erosion today, but that does not ensure that they do not have a brighter tomorrow.

    You seem to be hoping for their collapse, but that is not happening yet.

  15. Robert Pogson

    “Yeah, that’s kinda normal when you get into monopoly position.”

    M$’s “monopoly” was as large as 96%. It is down to 76% of new PCs (notebooks and desktops). So, it’s not the case that they have it all and can only go down. That was never really true, but now they are on the way down and cannot seem to stop. Even “7″ which is supposed to be wonderful cannot stop the slide. I have only seen one report that “7″ made a difference but the data were clearly fudged because the same uptick in usage for “7″ was also shown in Vista, which makes no sense at all. w3schools.com shows a continuous slide for installed base/web stats. When you include the smart thingies, it’s game over.

  16. Joey McIntyre

    Idiot! a drop in revenue is not a loss. I never said they had a loss just a drop in revenue.

    What does it tell you when a monopoly is reducing its profit? It

    Revenue is not the same as profit. Revenue is GROSS revenue (as in money in before expenses), Profit is NET revenue (as in money kept after expenses).

    Just as a raise in revenue does not inherently translate into a raise in profits (for example, Red Hat has been continually growing in terms of gross revenue, while net revenue has largely remained stagnant), a drop in gross revenue does not strictly translate into a loss of profits.

    Beyond that, your initial argument is flawed, to suggest that Microsoft’s monopoly is dying because they’re not doing too well in markets they’ve historically never done well in, and are completely unrelated to their actual monopolies (in the desktop OS and Office spaces) is well, it should have to pointed out why the train of though it ludicrous at best.

    It’s like saying that Oracle is dying because the perform poorly in the Office suite market.

    It’s a sign that they have peaked and have nowhere to go but down.

    Yeah, that’s kinda normal when you get into monopoly position. They had a slight quarterly drop last year as well, and there was talk about the end of Microsoft. then they released Seven, and scored record profits. And now it begins again.

    but it has already lost any chance of monopoly on mobile devices

    They never really had a chance at monopolizing that market. You make it sound like it didn’t exist before android and the iphone came along. They’ve been a non-sequitur in the mobile space for well over a decade, and they were never strong in the embedded space in general (though WinCE is in a respectable third place behind the VxWorks and QNX juggernauts, mostly due to its ability to run on the z80)

    Your fixation on Eight and ARM is ridiculous as well, you’re well aware that Seven has already been demonstrated to run on ARM and will be entering the tablet space as early as Q1 ’12.

    It’s really not as convoluted as you might think to port NT to other architectures, it’s portable by design (NT has been available for PPC, Sparc, MIPS and the Alpha) forting to Itanium was trivial and done the moment it was deemed to be worthwhile, not to mention CE and WinMO have run on ppc, mips and arm for over a decade.

    Reference or is this another imaginary thought?

    Everyone else usually means “Apple, Google and the one or two randoms that fit my argument”.

    Wait for the stories next quarter on the “massive loss in net revenue!!!!1111two” after MS drops a few bil on Skype.

    Notice how Microsoft is to be the only victim of ARMageddon, and not anyone else (like apple) who relies on the x86?

  17. Robert Pogson

    Idiot! a drop in revenue is not a loss. I never said they had a loss just a drop in revenue.

    What does it tell you when a monopoly is reducing its profit? It is finally feeling competition. This is only about the second time in history that M$ had a reduced profit over time for that other OS. It’s a sign that they have peaked and have nowhere to go but down.

    Here is the copy and paste right from their recent 10-Q

    That other OS revenue in millions

    Three Months Ended March 31
    2011 2010
    Revenue $4,393 $4,508

    For the greater certainty, $4393 is less than $4508.

  18. The Other Dave

    They’re making more money than they did last year Robert and the link you so gleefully gave demonstrates what I had said which is that Microsoft is making profit and is doing quite well.

    Your statement:

    “had a drop in revenue while almost everyone else in IT had serious growth”

    Is false and Microsoft is making a profit

    You’re coming up with all these failed inferences due to your religious FOSS zealotry that you can’t even see how stupid you look quoting a reference that proves you wrong.

    Your reference proves me correct. Jesus, can’t you even try to make this a challenge?

  19. Robert Pogson

    Profit for that other OS client division was down Q1 2011 v Q1 2010. That’s a fact. Ask M$.

    The future is coming. The present is not identical to the future but hints at it.

  20. Robert Pogson

    Q1 2011:
    That other OS revenue $4.393billion while Q1 2010 was at $4.508billion, down 2.55%

    see 10Q
    Look for Note 16 Segment Information

    According to IDC, shipments of PCs in Q1 were down 3.2% so M$’s result seems in line. Where are all those migrations of old machines to “7″ that we heard about? They don’t depend on sales of new PCs at least in part. However, M$ is not involved in the booming mobile market which had explosive growth:
    Google’s Android had 7.7% increase in share of active subscribers while M$’s share declined 1.7%. That’s change in share of active subscribers, so you can imagine how dramatically different the the share of actual sales are. see ComScore

    Apple had a 28% increase in Mac (desktops+notebooks) shipments and a 113% increase in smart phone shipments and the iPad did well. see 10Q

  21. The Other Dave

    The future of M$ is greatly reduced margins, and sharing IT with others on commonly agreed terms, not dictates.

    And yet they are as strong as ever with record profits from Office, XBox, Windows 7. Nice try at your propaganda Pogson.

  22. The Other Dave

    had a drop in revenue while almost everyone else in IT had serious growth

    Reference or is this another imaginary thought?

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