Yes, You Can Lose Your Shirt Selling Wintel

This is about SONY, but it could apply to most OEMs for their Wintel business.“The PC business contributed Â¥91.7 billion in operating losses. Of that, Â¥58.3 billion was related to Sony’s decision to sell its PC activities.” SONY was losing money on every PC it sold with Wintel. The reason is obvious. If you have to pay M$ for permission to ship a PC that you made and sold, you are cutting your margin, if any, perilously thin. Many OEMs make only a few percent profit on PCs. Perhaps SONY had higher manufacturing costs which pushed it into the “red”. Perhaps it sold high-end models that consumers didn’t want. Whatever the mechanisms, if they made $50 more on each PC by not paying $50 to M$, they would have been profitable. They sold millions of PCs per annum, and paid hundreds of $millions to M$ that they could not afford.

An alternative would have been to sell GNU/Linux on those Vaios. So what if they sold fewer machines? They would have been profitable machines. They could have sold a lot of GNU/Linux machines instead of having a huge loss just paying for the exit.

See PC sale leads Sony to $1.25B loss, more gloom ahead.

See also, Bye Bye-O to Vaio: Sony Is The Canary In Two Coal Mines

Forbes: “Sony was too small in PCs to be the domino that pushes over the stack, but it’s likely the canary in the coal mine.”

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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8 Responses to Yes, You Can Lose Your Shirt Selling Wintel

  1. oiaohm says:

    kurkosdr the reality here is not every OEM pays the same amount per copy of Windows. Microsoft offers volume discounts. Sony being lower volume in fact had to pay more.

    Even android makers are suffering from margin crush. But margin crush is not as bad when your core chip is arm. Cost of Arm chips in mass volume is at max a few dollars. Cost of X86 is way more to have your core. So not giving you as much room to play with.

  2. wolfgang wrote, “apple gains were sony loss. sony not recover by selling cheapo crapola linux computer”.

    That’s probably true but SONY had a choice and chose to drop out. SONY didn’t have to sell cheap computers. They just needed to make a little more money per PC by dropping M$. Lots of Vaios run GNU/Linux just fine and there is a market SONY chose not to enter. Perhaps the buyer of their business will.

  3. wolfgang says:

    …sony now baloney…

    sony vaio was fancy pc for boss or fast tracker man. when apple get traction back, apple gains were sony loss. sony not recover by selling cheapo crapola linux computer. xbox take much money out of game console market, too.

    sony cash cows turn into schnitzel meat. maybe worse.

  4. kurkosdr wrote, “Every OEM out there paid the same license to MS. Yet not every OEM lost as much per PC as Sony”.

    The costs of setting up production, production, and distribution all have some base plus cost per unit. SONY produced fewer units than other so had higher costs per unit. If they had not paid M$ they would have had lower costs per unit than other Wintel units. Margins for OEMs are almost always below 10% and lately have been ~1%, far less than what they pay M$. A PC that sells in stores for ~$300 may cost the OEM ~$200 to build and ship but they still have to pay M$ ~$50 basically for nothing at all. So, OEMs might have a margin 25 times larger by not paying M$. SONY could certainly have been profitable in PCs with GNU/Linux. SONY’s advertising guys could have promoted GNU/Linux with the surplus but they chose to give up, fearing M$’s revenge one way or another. e.g. perhaps M$ would have demanded $100 per unit for FAT licences or whatever…

  5. Deaf Spy says:

    Kurks, let me tell you what would’ve happened had Sony taken that particular path.
    The community would scream to heaven that Sony’s stacks are heathen, unpure, not-compatible, not following standards (what standards), and not free, because they would not work with the constant ABI mess the kernel is.

    Miguel d’Icaza gave Linux a stable high-level API, which was good even for desktop application. The morons threw it away.

  6. ram says:

    Sony also has a nasty habit of suing their customers. This has turned off alot of talent in the media industry that might otherwise use their hardware.

  7. dougman says:

    Sony will be the next OEM to embrace Chromebooks.

  8. kurkosdr says:

    Huh? Every OEM out there paid the same license to MS. Yet not every OEM lost as much per PC as Sony. The reason OEMs suffered such a margin crush was the relentless race to the bottom.

    Android allows OEMs to customize the experience and hence differentiate, preventing the margin crush that lack of differentation causes.

    Generally, Sony loses money on EVERY market out there that is commoditized and has a race to the bottom going on (TVs also come to mind). But you conveniently forgot that.

    What Sony could have done was invest in a heavily customized Linux, down to the graphics and audio stack (to fix the back compat issues). That was the path not taken.

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