“D&C Licensing revenue decreased $474 million or 2%, due mainly to lower revenue from licenses of Consumer Office and Windows OEM, offset in part by increased Windows Phone revenue. Consumer Office revenue declined $618 million or 15%, while Windows OEM revenue declined 10%. These decreases resulted primarily from the impact on revenue of a decline in the x86 PC market, which we estimate declined approximately 9%. Windows Phone revenue increased $1.2 billion, including an increase in patent licensing revenue and sales of Windows Phone licenses.”
See EX-99.2 of a recent 8-K filing.
Doing some maths… Total licensing revenue declined $474 million. The office suite declined $618 million. Phoney “7” increased $1.2 billion. That means OEM licensing for the client OS decreased +$474m +$1200m -$618m = $1056m but they state OEM licensing decreased 10%. So, 2012 OEM revenue must have been around $10.56billion and 2013 OEM revenue must have been about $9.51billion. In a world shipping ~280 million legacy PCs per annum, M$ is raking in about $34 per PC on average, probably still $50 – $60 per PC that actually ships with that other OS.
When the legacy PC market is struggling for growth and PCs are being delivered to consumers down to ~$250 or so, the burden that M$ is to the market is clear. GNU/Linux or Android/Linux give OEMs a much larger margin. Sure, OEMs get a markup on the licence, but that doesn’t help if their competition is selling multiple small cheap computers for every legacy PC the OEM ships. Guess who does all the work? The OEM. M$’s not even breaking a sweat issuing permission slips to use hardware they don’t make. Despite declines, M$’s gross margin is still 90% of licensing revenue. OEMs actually make legacy PCs at a loss offset only by the margin on the licences for that other OS. OEMs are tired of being M$’s slave and are steadily decreasing the number of PCs shipping with that other OS. Instead they are producing what the market wants, small cheap computers running FLOSS. This trend is accelerating as OEMs trip over each other trying to exit. Even retailers are placing unboxed Chromebooks on shelves once cluttered with that other OS. My local Walmart doesn’t even bother to unbox desktop PCs with that other OS. They are piled up on the floor under the bottom shelf.