Wintel Fragments

“Revenue in Devices & Consumer, which includes everything from consumer Windows licenses to Surface, Xbox and Bing, grew 13 percent to $11.91 billion.
Though Windows revenue from manufacturers declined 3 percent, revenue from Surface — Microsoft launched the second generation of its Surface tablets in the second quarter — doubled from the previous quarter.”
While M$’s latest quarterly report looks good for M$, it clearly shows Wintel is split right down the middle. On the one hand, M$ saved its bacon by growing sales of “surface” by $billions. On the other, its old partners, the OEMs, clearly took a big hit. M$ and everyone else are taking revenue from those OEMs. M$ has an unfair advantage against the OEMs. M$ doesn’t have to pay its own licensing fees…

What will the OEMs do? Continue as manufacturing slaves for M$ or go into business for themselves with FLOSS and GNU/Linux and Android/Linux? Wait! They are in business for themselves, right? That means in 2014 OEMs that dipped their toes in the FLOSS pool last year will plunge in. Android/Linux, Ubuntu GNU/Linux, Linpus GNU/Linux and every other kind of */Linux will be shipped in huge numbers. The consumers have shown they won’t pay retailers and OEMs to supply Wintel PCs but for ~$100 less per unit with FLOSS the flow of legacy PCs and every other kind of PCs the OEMs can produce will take off. I wonder how many of those “surfaces” still gather dust on retail shelves? Maybe the retailers took a hit as well. 😉

In case the reader is skeptical, take a look at the numbers:

2012 Q3 2013 Q3
M$’s Licensing Revenue $5.70b $5.38b
M$’s Hardware Revenue $2.81b $4.73b
M$’s Sum $8.51b $10.11b

Essentially, M$’s take from the global IT budget of consumers rose $1.6b and the OEMs’ fell… That is a huge change to the “partnership” enslavement licence. Wintel is broken and M$ neither can nor wants to put it back together. The same thing is happening to the “resellers” who get to point businesses at M$’s cloud never to be seen again…

I’m OK with this. The “partners” of M$ will now have to work for a living and get involved with FLOSS or die. M$ can afford to become an OEM if necessary but it will also have to work for a living. Good. M$’s gross margin for consumers dropped $1b while it rose $1b for businesses. That’s the choice that has been made. Hundreds of millions of consumers freed themselves from Wintel in 2013. 2014 looks to be an even better year.

See Microsoft’s quarterly numbers spring past estimates | The Seattle Times.

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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12 Responses to Wintel Fragments

  1. oiaohm says:

    That is the problem most spam tracking will be blocked on Android. Lot will be blocked on PC. Not every PC user is using Outlook.

    The reality there is no way I can locate really get a clue about what percentage of anything is on line.

    Mats Hagglund gmail online proxies the images. Result is spam is also not counted well.

  2. Mats Hagglund says:

    oiaohm – maybe, maybe not. I’m not at all expert. One comment was interesting:

    “The reason for these numbers are simple. The iphone and ipad opens emails showing all the images by default. Outlook and google block images by default. The images are what are used for tracking. So when you delete an email on your iphone they report the email as opened, in outlook no report at all. What numbers would you expect to see?”

  3. oiaohm says:

    Mats Hagglund spam does lie. Android links to gmail account fairly much. Gmail has more effective spam blocking than the apple solution.

    PC also might be more not displayed due to anti-virus anti-spam.

  4. Mats Hagglund says:

    “Spam doesn’t lie: American consumers desert PCs for most mundane chore
    Two-thirds of ‘brand marketing messages’ were opened in Q4 on a smartphone or tablet as another task flees the personal computer ”

    http://www.computerworld.com/s/article/9245634/Spam_doesn_t_lie_American_consumers_desert_PCs_for_most_mundane_chore

    It would be interesting to know why Android-tablet got only some 12% of tablets while iOS got more than 86%.

    “Android was a distant second, opening about 14% of the spam, an increase, Movable Ink said, from 10% in 2013’s third quarter. Like iOS, Android leaned heavily toward smartphones, but even more so: While Android-powered smartphones accounted for 12.5% of the total, Android tablets represented just 1.9%. ”

    People are bying Android-tablets but don’t use them like iPad.

  5. dougman wrote, “expect those things to be canned”.

    Never underestimate the determination of a dying man to be nasty. I would bet M$ would think nothing of punishing every OEM that is abandoning ship by selling stuff at or below cost. They can afford to spend $billions the way some companies spend $thousands. M$ always thinks in terms of owning the whole market and if that is not possible, preventing others from having any fun. M$ no longer needs the desktop client as revenue but needs it to be out there making their other services seem useful. Consumers will be free to have choice even if every business that ever did business with M$ will be damaged forever. Look at the companies that are thriving: Google, Samsung, Apple… The one common feature is no great lock-in to M$. I expect in 2014 every OEM enslaved to M$ will be wide awake and looking for an exit, the least painful exit. Their problem is they still have considerable revenue from Wintel and cannot just kill it without a lot of pain. The others are laughing all the way to the bank because they can invest heavily and get nothing but great returns.

    2014 will be the year we see which OEMs are going to be drowned with M$’s client OS or survive and thrive in the future. This is a great opportunity for GNU/Linux just when so many have lost faith. Some OEMs have seen the light and are gearing up to ship */Linux on everything sooner or later. I would bet sooner.

    Margins for hardware have been very small for years, even negative sometimes. There’s no way many OEMs can survive with M$ taking $billions out of their market. I doubt they want to live on tiny margins provided by working directly as ODMs for M$. They want more.

    In 2013, HP, the biggest OEM of PCs had revenue of $32billion in “personal systems” but less than $1billion in profit, less than 3%. That meagre profit has been declining steadily year after year. Meanwhile, M$ took $2-3billion in revenue from those PCs with a huge margin, earning way more. The tail is wagging the dog and HP knows it. HP should be working for its customers, not M$. The consumer doesn’t care who gets the money and wouldn’t mind if HP got a bigger share. HP and the consumer can get together over a different OS. Somebody at HP will figure that out this year but they have to figure out how to make the transition. Android/Linux has shown that if HP puts out an OS, that gets onto retail shelves, HP will be able to sell it.

  6. oiaohm says:

    dougman please remember that surface 32 million dollar hole Surface does not include a payment for the OS. This also shows why more and more OEMs are looking android its simply not possible to make a profit while you have one party selling less than cost in a big way.

  7. dougman says:

    http://www.pcworld.com/article/2091049/microsoft-loses-money-on-every-surface-tablet-it-sells.html

    I always knew Surface was a losing venture and when the new CEO takes over, expect those things to be canned.

  8. Another good find by Mats Hagglund. I thought about checking Digitimes before going to bed but I was too tired… Getting old…

    M$ may be proud of “surface” etc. but it’s just getting a tiny slice of the wave of small cheap computers that emerged last year. It does look like the wave of tablets is peaking soon, though. The question remains whether the rate of shipments will level off soon or fall down. I’m thinking the rate of shipments will level off as established markets become saturated and emerging markets build more or less rapidly. This is a phenomenon we didn’t see when the first PCs emerged. They just kept growing but were limited by the huge cost/labour of production. The small cheap computers are much easier to produce simply because they are so small and there is so much automation in the process. The early PCs had horrendous parts-counts and low yields. Still, tablets have displaced a lot of notebooks and some desktops in the stream to consumers. I would bet businesses will adopt tablets sooner or later and with that Wintel in business will be on its last legs. This 10-Q shows business is still seriously locked in and even willing to pay in advance for M$’s products…

    See also Windows 9 rumors freeze corporate Windows 8 uptake – Network World

  9. Mats Hagglund wrote, “makes it clear the company also spent more than it made then”

    Good find! Maybe you should be writing this blog…

    This suggests that M$ will eventually make money on “surface” but at a cost of loyalty by OEMs. We could be seeing the last nail in Wintel’s coffin.

  10. Mats Hagglund says:

    Perhaps those figures “51.2% Android, 44.9% iOS and 3.9% Windows” are based on all non-whitebox tablets market share. When all whitebox (33.8%) are (?) Android we can now make the final calculation of marketshare:

    Android (or other Linux) 67.7%
    iOS 29.7%
    Windows 2.6%

  11. Mats Hagglund says:

    New statistics of tablet sales (4Q 2013). However i can’t make sure what’s the share of Linux-tablets. Let me quess.

    -iPad 29.7%
    -Windows 3.9%
    -Linux 66.3%
    -others 0.1%

    http://www.digitimes.com/news/a20140124PD203.html

    “iPads accounted for 29.7% of shipments… ”

    ” … and Windows-based 3.9% ”

    However why they were claiming 44.9% for iOS? Is there other iOS tablets than iPad? Likely not. That’s why i guess Linux got about 66% of tablet markets at the end of the year 2013.

  12. Mats Hagglund says:

    This sounds interesting indeed:

    “In the third quarter of 2013, Microsoft did not spell out the revenue versus cost of revenue comparison in such stark terms, but revisiting the SEC filing from late October makes it clear the company also spent more than it made then.”

    http://www.computerworld.com/s/article/9245673/Microsoft_loses_money_on_each_Surface_sold

    And at the same time Nokia’s Lumia sales was total disaster. Less sales ( -600 000 Lumia) than in previous quarter.

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