Delusions of M$

M$ is big and has some inertia but it is well past its prime in terms of shaping markets. The sectors that it locked in solidly, retailers and OEMs of PCs, are still pretty well locked in but the growth has gone. While Moore’s Law has made the price/performance of integrated circuits plummet, there’s just too much hardware in a PC made the old way: huge batteries/PSU, case, and wasted space between bulky drives. ARMed devices are able to be built for less and give most users of PCs what they want plus extraordinary mobility and M$’s OS does not run on them, yet.

In their latest annual report, M$ showed its delusions:
“The Windows operating system faces competition from various commercial software products offered by well-established companies, mainly Apple and Google. The Windows operating system also faces competition from alternative platforms and devices that may reduce demand for PCs. User and usage volumes on mobile devices are increasing worldwide relative to the PC. We believe Windows competes effectively by giving customers choice, flexibility, security, a familiar and easy-to-use interface, compatibility with a broad range of hardware and software applications, and the largest support network for any operating system.”

M$ is not in touch with reality. It’s not so much software that’s competing with their software but hardware+software systems from others that are smaller, just as useful, and costing less to build, ship, and to buy. A PC with Wintel inside starts at nearly $200 just for the CPU and OS. The cost of making an ARMed smart thingy is in the range of $100 to $200, complete. That’s not a sustainable difference for the use many people make of personal computers. To the OEMs, the additional cost of hard drives, RAM, PSU, optical drives and case and higher shipping costs mean that the future is going to small cheap computers not running Wintel.

Further, there are about 1500 x86/amd64 PCs in the world today. Each year about 450million new ones are shipped. That’s how many smart phones ship in a year and the growth rate is 60%. There could be 2000 ARMed smart thingies running Android/Linux or GNU/Linux in less than two years and in four years, almost everyone on Earth may have one. Apple has a good share now but has already lost the lead to Android/Linux. The smart phones can be had for less than $100 now, doubling and redoubling the market for them.

The same will happen with tablets. A small, number about 60million will be shipped in 2011 but in 2012, the number could increase dramatically, about 300%. That means when “8” is released, the installed base of GNU/Linux or Android/Linux or iPad tablets could be about 200 million. OEMs are not going to shift to the “tight margin” model that M$ imposes on PCs in the smart thingies. The newcomers will be making more than M$’s partners on small cheap computers than on “PCs”. By the end of 2012, consumers and businesses will know and love the small cheap computer and will turn up their noses at M$ offering small expensive computers.

No. M$ is deluded. They are giving a middle-distance runner a lead of at least one lap. M$ may be able to sustain considerable income but the growth is gone forever and we could be seeing the peak of their client OS in terms of units sold and revenue. They are looking at near-zero growth and the new technology is seeing multiples of 100% growth.

About Robert Pogson

I am a retired teacher in Canada. I taught in the subject areas where I have worked for almost forty years: maths, physics, chemistry and computers. I love hunting, fishing, picking berries and mushrooms, too.
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13 Responses to Delusions of M$

  1. oiaohm says:

    Sorry I keep on typing Bada wrong.

    Yes the parallels are kinda spooky in the mobile phone market to the old PC market.

    Symbian is officially dead. So its 20 percent has to go somewhere else in time. Most likely enough will go to android that it crosses the 50 percent mark.

    Research In Motion and iOS both do exclusive.

    Android and Microsoft are both multi vendor other than Nokia they are basically all the same vendors.

    Bada has been only Samsung.

    Note the dropping other percentage. In those gartner numbers 3.2 to 1.0. This happened in the PC market as well before the crunch.

    Android Bada and OSi have been the only ones with growing market share in the mobile phone market over the last 3 years.

    RIM lost market share but did increase number of Units shipped. This is not unhealthy state. May level as a lower percentage in the market but still profitable.

    Microsoft shipped less units same with Symbian. So Unless Microsoft pulls something impressive out the bag they are going to follow Symbian out the door. Heck worst MS goes out the door before Symbian does. What is possible thinking MS decent rate is faster.

    1 to 2 years for others and Microsoft to hit rock bottom. Bada did not show on the 2010 gartner report. Because once you fall under 1 percent market share you become a other.

    Yes inside a year Microsoft may no longer be listed in gartner reports on mobile phone market.

    Gartner numbers I normally don’t mind people quoting on mobiles phones they are 100 percent correct.

    Also read the companies making phones careful.

    Depends on mobile phones for income.
    Nokia
    Sony Ericsson
    Partly depend on mobile
    Research In Motion(QNX sold in the broader embedded market)
    Apple(Desktop computer)
    But both are over 50 percent mobile and will be hurt badly if there mobile sales drop.

    The following supplies the 4 above with parts and other companies with parts so are diverse business with Mobile phones making up less than 40 percent of their operations.
    Samsung
    LG
    ZTE
    HTC
    Motorola
    Huawei Device

    Funny enough one of Huawei biggest sellers is digital photo frames.

    Basically Android and Bada are not unknown factors.

    We know Bada is here to stay even as the bottom 1 to 2 percent in the market. Samsung is a stubborn mule this way. Samsung is also using Bada in there TV sets. So its a diverse item going out 2 doors at least most likely more. Samsung is not like IBM of old. Samsung is more a HP of old. Never binding there options down and making sure they have a retreat plan. Bada is Samsung retreat plan. Samsung does not need to sell Bada to anyone else to make a profit from it.

    The issue is how is Microsoft lower than Bada in the market. Only 1 company makes Bada devices they are a side line. Many are shipping Windows Phone 7. So where in the Microsoft good will? Thinking Bada is 10 years old. It use to normally hang out in the other section of the market.

    Only wild card that is left is Meego. It has support from many different vendors. But very few devices released with it on as yet.

    Microsoft is going to be force to make an extrema move to stay in game. The move I am expecting is that Windows 8 is for desktop and mobile phones. This will have major bottom line damage to Microsoft.

    Most of the competitors only have to recover the cost of the hardware to be ok. Microsoft needs income for the software.

    Basically I know Microsoft is in trouble in the mobile phone market. The question is how bad. And what will be the damage to Microsoft of them trying to dig self out of hole. Or will they simply give up the fight.

    The indicator of critical mass in most markets is the others dropping to almost nothing combined with watching what were strong competitors disappearing into others so leaving less and less competitors in the market.

    The tradition point for critical mass is one competitor making it to 60 percent market share. There is a possibility android might make that in the next 12 months.

    Yes the Gartner is showing a sign of incoming critical mass event in Mobile phones. Critical mass events are where all hell breaks lose. Anti-trust cases people caught doing illegal things under the table to complete. Yes its going to get interesting.

  2. Contrarian says:

    “Can they pull off creating an ecosystem that seems to be totally cut off those that apple google and (eventually) microsoft will be offering?”

    Ah! “Bada” not “baba”.

    I don’t know if they will be successful, of course, but I think that it is probably a normal thing to see happening.

    If you look for parallels in the PC world, it seems to be interesting to note that the early days saw companies like Apple, TI, Tandy, and others pushing products with differing capabilities and producing pretty much all of their own software, particularly the OS. There were some unbranded efforts with CP/M and the S-100 bus products, too. You can point to a lot of similarities in how these companies approached what became the PC market, including the sudden entry of a giant brand (IBM) that had immediate credibility and moved to the lead almost overnight.

    I think there is an aspect that some call “critical mass” at work here. Right now, iPhone is more than 50% of Apple’s business and even more of their profit picture. Does that make Apple a phone OEM primarily even though they had a computer heritage? Samsung makes a lot of stuff and is a biggie in the phone business, but is that enough of a product to take their management focus? Remember that IBM never seemed to really treat PCs as a definite line of business issue and management was always outside of Armonk. How about the others who are in a similar fix with Samsung, such as LG, RIM, HTC and Sony?

    Then there is the still reigning telephone Big Daddy, Nokia, finally coming around and taking some action. Interestingly enough, they are hooking up with Microsoft.

    Google’s entry into the hardware business with the Motorola purchase seems somewhat out of character for them as well. Motorola has been making phones for a long time now, but they were a declining competitor in the old cell phone market although they were shifting to smart phones ahead of some others. I found a rather dated score sheet here:

    http://www.gartner.com/it/page.jsp?id=1764714

    You can read these tea leaves any way you want. The parallels are kind of spooky though.

  3. oldman says:

    ““Baba” and “Meego” are complete mysteries, #oiaohm. They are not making much of a splash.”

    Actually Contrarian, it is quite instructive to take look at http://www.bada.com. One does not have to go very far to see that samsung is serious about going its own way.

    Can they pull off creating an ecosystem that seems to be totally cut off those that apple google and (eventually) microsoft will be offering?

    Who knows?

  4. Contrarian says:

    “Android, Baba and Meego is about providing these constant images”

    Android is not really Linux other than some basic bits and bytes that have nothing much to do with shaping the product image. At the current time, it is not even particularly open source, so it is not clear as to just what the future holds. “Baba” and “Meego” are complete mysteries, #oiaohm. They are not making much of a splash.

    Maybe they will have more of a chance when Google finalizes the Motorola purchase and ends up competing with Samsung and the rest.

    “Lot of you MS supporters Phenom have a very narrow view of what happened and what has been the long term results”

    Yeah, #phenom, quit focusing on the fact that Windows took over 99.44% of the netbook market. You can still buy some Linux leftovers from AliBaba in Singapore, you know. Just ask #pogson for link. That is a sure sign that Linux lives on!

    “Things are all getting worse for Microsoft.”

    With sales touching an all time high of $70B and a return to double digit growth, one is reminded of the phrase “Thank you, sir! May I please have another?” as Microsoft endures this paddling. 🙂

  5. oiaohm says:

    Phenom we have not forgot history. Decade-old OS at highly discounted rates.

    GNU/Linux was not showing a single image to end users either. Or not a single image end users could identify.

    Android, Baba and Meego is about providing these constant images.

    Really lot like to see XP pushing Linux out the way as a victory. Really we have to thank Microsoft for doing this. Result has been a lot more hardware developers working in the Linux kernel and other Linux software parts.

    Microsoft proved to hardware makers how to get Microsoft to major-ally discount License prices.

    Somehow I think XP so call victory on netbooks is going to be remembers as Microsoft biggest mistake. Since it basically is like putting blood in the water to attract sharks around them. Hardware makers are now looking at Linux thinking hmm if we make this good we will not have to pay Microsoft so more profit if we don’t make it good enough it still might provide enough force to get major discount rates from Microsoft. So either way developing Linux is not hurting us.

    Yes Microsoft major XP discounting is also what gave Google the idea of starting android matching what hardware makers would accept.

    Lot of you MS supporters Phenom have a very narrow view of what happened and what has been the long term results. Long term results are not heathly for Microsoft and are in fact suggesting a strong second wave of Linux will hit Microsoft.

    Yes short term results was the defeat of Linux netbooks but it was not an 100 percent defeat. Some are still being made. More hardware makers working on Linux. More Microsoft forced to resort to patents to try to push up price of Linux. Leading to the current possible M.A.D. battle between Microsoft and Motorola/Google.

    Things are all getting worse for Microsoft.

  6. Phenom says:

    I remember OEMs testing the waters of netbooks once, and I remember the results, too. One almost decade-old OS swept the floor with the latest GNU/Linux. History should never be overlooked.

  7. It’s also important to note that many OEMs who build Android/Linux smart thingies are not traditionally builders of PCs. This increases opportunities for OEMs to make money in a new line of business as well as augmenting old lines. M$ has no control over this.

  8. Whitespiral says:

    OEMs are carefully testing the waters these years, while they build tablets and other stuff powered by non-MS software. They will come at time when one OEM oficially dumps MS. The rest of them will watch first, then follow.

  9. oiaohm says:

    JohnMc while budgets are tight a lot of companies are cutting there windows usage.

    Recession and prep for Recessions is Linux boom sales. Yes Redhat having massive growth more than expected means that lot of businesses don’t think the markets are going to be healthy soon.

    Yes every month in the last Recession was record sales for all Linux sellers.

    $100 dollar a copy is still profitable by a large margin.

    “The big corps where the $$$ is, will pay a premium to shift IT risk onto Dell and Microsoft so they can reduce the chickens they have to choke.”

    Only corps run by idiots normally smaller end of market normally does this. Reason read the fine print you don’t have any right to choke dell or Microsoft for the loss of your data. Dell only has to provide operational hardware and Microsoft is basically not liable for anything.

    IBM support solutions do have an option for insurance for sending Cert certified staff in case of secuirty breach and also have a option for insurance for data recovery. This is OS neutral.

    Basically please go and read what Dell and Microsoft really provide businesses with in promises you find they suck. Main reason is Dell is normally cheap not good is why they have market.

    IBM has white papers on the topic of migrating to Linux. Results are 80 percent of machine in business or more normally don’t require Windows. Next is the Linux machines will have less support staff required as long as they are new. Old hardware can have equal or more numbers of issues than a new Windows machines.

    Also a lower downtime rate. Linux machines normally don’t try to reboot halfway threw the day and other productivity effecting issues Windows does.

    More and more Large business is going Linux get use to it JohnMc.

    Android is also effecting smaller businesses.

  10. JohnMc says:

    First you are comparing apples to oranges. Android/ARM devices vs Windows/Intel. As a JD Powers commercial would say — `best in its class`. The two you are attempting to compare are not the same.

    Also don’t underestimate the value of inertia and risk shifting. The big corps where the $$$ is, will pay a premium to shift IT risk onto Dell and Microsoft so they can reduce the chickens they have to choke.

    Finally nothing you have said will be what kills the M$ goose. What will kill M$ is the expense/value curve. It took M$ several billion to roll out Vista. They got their investment back in short order because the unit price remained high. But the high price point won’t remain. At some point, when the market mavens tell M$ that they can only get $100 for Windows 18 but face a $9Bn investment the Suits will balk. When the risk reward is too high the word out of the Seattle boardroom will be — `This is the last Windows version.`

    Till then, Windows at least at the corporate level is a viable platform.

  11. Viv Collins says:

    The danger MS faces is not from Linux or Android but from Oracle now that it owns the Sun IP, the PC market now boils down to what browser you are running simply because what ever you are doing its probably running inside a browser window under Java!

    Who ever provides that access to a user in the way they find attractive is most likely going to be the winner…

  12. The world of technology moves quickly. In their prime, M$ could respond in months, now they are years behind.

  13. x says:

    I do not like Microsoft as a company, but they allways had the power to come back and hit hard. And do not forget about patents, they may block Android & CO in many countries.

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