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Linux Business Portables Windows Operating Systems Software Hardware

Netbooks Take a Bite Out of Windows Profits 221

Posted by timothy
from the ineffables-abound dept.
twitter writes "Analysts at Bloomberg noticed the tumble in Microsoft's traditional software sales last quarter and blamed it on netbooks: 'The devices, which usually cost less than $500, are the fastest-growing segment of the personal-computer industry — a trend that's eating into Microsoft's revenue. Windows sales fell short of forecasts last quarter and the company cut growth projections for the year, citing the lower revenue it gets from netbooks. When makers of the computers do use Windows, they typically opt for older and cheaper versions of the software. Equipping Linux on a computer costs about $5, compared with $40 to $50 for XP and about $100 for Vista, according to estimates by Jenny Lai, a Taipei-based analyst at CLSA Ltd.' This is why MS declared war on the segment last year and palm top computers in previous years. While they may have successfully tamed the Asus EEE PC, they can't hold back everyone who wants to make a buck on cheap hardware and free software. Analysts have predicted the fall of MS's business model when computers break below $250/unit retail. We are there now, and it has shown in the bottom line."
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Netbooks Take a Bite Out of Windows Profits

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  • by schnikies79 (788746) on Saturday November 08, 2008 @02:26PM (#25689003)

    The economy (U.S. and the world) has slowed. Why would Microsoft be bucking the trend?

  • Not farfetched (Score:5, Insightful)

    by nurb432 (527695) on Saturday November 08, 2008 @02:33PM (#25689037) Homepage Journal

    They are salivating while trying to make it work. Their MOLP"s are almost that and part of their core revenue stream.

  • Re:MSFT goes SaaS? (Score:5, Insightful)

    by jonbryce (703250) on Saturday November 08, 2008 @02:40PM (#25689085) Homepage

    People are not going to pay for updates. It is difficult enough to persuade people to load updates when they are free.

  • Re:Mmm... (Score:5, Insightful)

    by Ilgaz (86384) on Saturday November 08, 2008 @02:44PM (#25689111) Homepage

    I stared to a Asus Eee thing a while ago running Windows XP. Just the idea of running XP on that machine along with Antivirus, Firewall and only the software updates horrified me.

    If the companies put XP as option to them, it is not like they are getting it free (or dirt cheap), it is because they are very afraid of Microsoft.

    If you are World's one of the most respected mainboard manufacturers (Asus) and you started to gain ground with your Laptops, you don't want to make Microsoft mad. MS can provide a single buggy driver update and create chaos in your customerbase. All they need to say "oops" after it. Customers will blame YOU, not them.

  • by symbolset (646467) on Saturday November 08, 2008 @02:47PM (#25689129) Journal

    Lots of talk of late about moving to less frequent refresh cycles. The bathtub graph of failures is more like a hockey stick, and the PCs in place have the processing power to meet people's needs throughout the current fiscal difficulty.

    Software support is of course an issue, but there are no fixes for this either on offer or projected through FY2011.

  • Re:MSFT goes SaaS? (Score:5, Insightful)

    by fuzzyfuzzyfungus (1223518) on Saturday November 08, 2008 @02:53PM (#25689157) Journal
    I'm not sure that SaaS can save them from this problem. People are fairly willing, these days, to pay monthly subscription fees for services, so there isn't an inherent psychological problem; but windows netbook $250 + $10/month vs. linux netbook $250 + $0/month is going to be a hard sell. Perhaps worse, though, is the interest cell companies are showing in selling subsidized netbooks with data plans. If the netbook+monthly fee thing becomes a telco standard, the MS will face the unpleasant prospect of having to play knife-fight-in-a-telephone-booth with the notoriously mean bloodsuckers at the telcos over exactly how much of the customer's monthly fee with go to them and how much to the cell guys.

    Ultimately, though, it just comes down to the fact that cheaper hardware demands cheaper software. 50 or 100 dollars for windows is noticable; but not hugely important in a $2000 computer. 50 dollars for windows on a netbook probably means the difference between impulse purchase and not. I don't think that this will affect MS's market share directly, they can afford to give away XP for netbooks until the end of time, if they want to. Their margins, though, will suffer, and that could be quite serious for some of their divisions. Being able to start a project and let it absolutely hemorrhage money for years if need be gives MS impressive strategic freedom. If their margins on Windows and Office suffer, they won't be able to do that anymore.
  • Re:Correction (Score:4, Insightful)

    by TeacherOfHeroes (892498) on Saturday November 08, 2008 @02:56PM (#25689175)

    Equipping Linux on a computer, USING CHILD LABOR IN CHINA, costs $5 each.

    Linux. So easy, even children can install it!

  • DamnSmallWindows (Score:2, Insightful)

    by TBoon (1381891) on Saturday November 08, 2008 @02:57PM (#25689179)
    I'd like to see MS reinvent the WinCE concept as something a bit more similar to DamnSmallLinux/PuppyLinux. A minimalistic base system, capable of (and optimized for) running at ultra low-end hardware, yet able to run virtually any "real" Windows application (and game) if the hardware is up to the task, and have storage space for the extra modules needed.
  • Re:MSFT goes SaaS? (Score:5, Insightful)

    by rolfwind (528248) on Saturday November 08, 2008 @03:08PM (#25689239)

    It's a little farfetched, I know, but it seems the way to go these days. I'd rather pay $50 upfront and then $10 per month for four years than pay $400 upfront at retail.

    $400 for Windows is too much, the OEMs pay much less.

    Also the last thing I need is another monthy bill. I have a Trac Phone to avoid that (could easily afford the iPhone but not justify the monthly rate). My used car is bought outright. Other necessary bills minimized, especially in this economy. Etcetera.

    Once windows becomes subsciption: it will either be structured in such a way (updates as you describe) that most people don't bother thus lose money anyway, or many people start migrating away which is exactly what they don't want. It would be the beginning of Linux as a mainstream desktop OS.

  • by RiotingPacifist (1228016) on Saturday November 08, 2008 @03:18PM (#25689315)

    But Microsoft don't make much money on home sales or oem sales (its something like $10-$20) they make their money on corporate sales, which are unaffected by the netbook trend. So this article IS just twitter bullshit.

    And this isn't the 1st time timothy has been caught.

  • by steeleye_brad (638310) on Saturday November 08, 2008 @03:18PM (#25689321)

    and people know how to use them.

    After working for a university help desk, I can tell you with a great deal of certainty that this is quite false.

    And I still think of a directory as a "folder" because pretty much all of my software refers to it as that. All the icons are of little folders, my file manager has a "make new folder" command, lots of programs I use have a command along the lines of "open folder". You know, maybe this is just proving that I'm some sort of "child clinging to my woobie," but I'm honestly not sure what the hell any of your points are.

  • by rhyder128k (1051042) on Saturday November 08, 2008 @03:25PM (#25689351) Homepage
    That might be true to an extent but surely people are going to make hardware and software last longer when money is tight? Some offices simply replace a machine once it goes wrong if it's more than a couple of years old. I dare say that a 1Ghz PC with XP (or even better GNU/Linux) would suffice as a workstation for 80% of office workers. Making the current crop of machines last for another five years might give companies a chance of riding out the down turn, or at worst, save some cash.

    Even firms that need top of the range PCs can retask them as general office machines after a couple of years rather than buying a new batch. All of this costs MS revenue.

    I wonder if these changes will cause MS to step up the lock-in+automatic obsolescence aspects of their software?

  • by Lumpy (12016) on Saturday November 08, 2008 @03:28PM (#25689387) Homepage

    Because it really is a part of a trend. I just got one of the el-cheapo Acer Aspire one. It's got a 160gig drive, a dual core processor, a 1024X400 screen that is brighter than any laptop I have ever seen (LED instead of the crappy CFL as well.

    This thing is really fast, really small, and cost me less than $350.00 at WALMART of all places. It does more and has better specs than my new Dell laptop from 2 years ago and cost 1/4 the price.

    Microsoft better be scared, because the high end one like this has XP on it and not vista. and that is how it was marketed to me, "you want these laptops because they do not come with vistal.. Vista is something you want to stay away from."

    Yes it's walmart, but even if the minimum wage know nothing about computers sales guy at walmart is telling people that vista sucks, then it is hurting microsoft... And I bought the high end aspire one.. most of them come with linux (a variant that sucks) and with ubuntu having a distro coming out just for these tiny pc's that is brain dead easy to install from a thumb drive, I can see joe sixpack installing ubuntu on his new pocket sized laptop he got for cheap.

  • Re:Mmm... (Score:2, Insightful)

    by Frac O Mac (1138427) on Saturday November 08, 2008 @04:05PM (#25689597)
    Maybe not necessarily blame them, but people sure would be wary of buying one.
  • by FudRucker (866063) on Saturday November 08, 2008 @04:17PM (#25689671)
    microsoft's exorbitant prices and chronic vulnerabilities made it necessary...

    people want to use their computers, not be used by a corporate giant and third parties nickeling & dimeing them to the limit at every corner...
  • Chill dude. (Score:4, Insightful)

    by turgid (580780) on Saturday November 08, 2008 @04:21PM (#25689697) Journal

    It's slashdot, don't take it so seriously. You're allowed to say M$. You're allowed to hang out here when the pub's shut and there's nothing on TV.

    Vista is a failure by most standards and Microsoft's OS monopoly is gradually being eroded. This recession is helping.

    Vista only "sells" because PeeCees come with it installed by default. Don't kid yourself that the situation has changed in the last few years. MS still has a monopoly and uses every dirty trick in the book to keep competing operating systems off of new machines.

    Also, remember that a substantial proportion of new (Vista) machines get reinstalled with Windows XP legally or not.

    Never mind, the future is bright. Windows 7 will come with 256 threads, comrade. Double-plus good!

    My Communist-Anti-American-Virus-Cancer Linux PeeCees eat 256 threads for breakfast. So do my All-American Sun SPARC/Solaris boxes. 10 lines of C says so.

    I don't like Microsoft, and I hate Windows. Bill Gates, Steve Balmer et. al. are a bunch of crooks. I'm human, I have opinions. Twitter's cool. It's allowed opinions, and it's nice to see them amongst the pro-M$ apology this site has become.

  • Re:You should not. (Score:5, Insightful)

    by David Gerard (12369) <{ku.oc.draregdivad} {ta} {todhsals}> on Saturday November 08, 2008 @04:27PM (#25689749) Homepage

    180 million sales! And at least some of those were actually activated and are actually in use!

    Microsoft have the precise number of Vista machines in the wild - it's the number hitting the Windows Update servers. But they don't push that number, they push the "licenses shipped" number, which is meaningless in a world with legally allowed XP upgrades.

  • by UnknowingFool (672806) on Saturday November 08, 2008 @04:49PM (#25689897)

    I mean,have you EVER heard of any other company killing off a product that was still selling quite well after 7 years? Most companies would kill for a product like that!

    Some companies do that when they feel that they need to make progress and their current product is holding back. Apple did it when they killed their iPod mini line even though it was their best selling line of iPods. Apple could see that flash was the wave of the future for smaller MP3 players and moved towards it. Unlike MS, Apple provided a better product at the same price. MS provided a product that was superior in some ways and inferior in others. However the cost was higher factoring hardware requirements. For those upgrading on older machines, Vista was not an improvement.

  • Re:You should not. (Score:4, Insightful)

    by ConceptJunkie (24823) on Saturday November 08, 2008 @05:03PM (#25689979) Homepage Journal

    And how many sales of Vista would there be if Microsoft didn't have a de facto monopoly and could force that steaming load of overripe cheese onto practically every new computer sold in the world?

    Not 180 million but maybe 180 thousand.

    Vista is a failure because very few people would choose it. The vast majority of sales were forced on people regardless of what they would choose, and I can guarantee most of those sales would not happen if customers didn't have a choice.

    I'm glad the Netbooks are hurting Microsoft because Microsoft does nothing but damage the industry and stagnates the state of the art. They are a boat anchor on the whole technical industry and the sooner their monopoly is broken, the better we will all be.

  • by Lumpy (12016) on Saturday November 08, 2008 @05:36PM (#25690163) Homepage

    That is funny.

    I deal with only degree holding education professionals for tech support. and Most do not know how to use a computer. they completely freak out when they lose a "folder" and they bork their Office or Outlook all the time by deleting a toolbar or doing something else that is trivial to fix.

    Most people, including highly educated people DO NOT know how to use a computer. They can barely operate them.

  • Re:Wrong (Score:5, Insightful)

    by Citizen of Earth (569446) on Saturday November 08, 2008 @06:19PM (#25690441)

    Yes most chinese workers can't afford two SUVs/trucks, a big house with a TV in each room (and the heating/cooling bill), a big slab of meat for every meal.

    It's kind of ironic how it's been the Chinese who have been financing so many Americans to be able to live beyond their means as described above.

  • by ThousandStars (556222) on Saturday November 08, 2008 @06:38PM (#25690557) Homepage
    Microsoft is being attacked from two sides: on the low end by netbooks and on the high end by Apple. The former is presumably capturing a large share of those who would otherwise buy $600 - $1,000 laptops, while the latter has been gaining marketshare almost exclusively in the $1,000+ market, where the cost of Windows is less noticeable relative to the cost of the computer itself. People who care about computing use OS X or Linux, as Paul Graham said [paulgraham.com]: "So not only does the desktop no longer matter, no one who cares about computers uses Microsoft's anyway."

    Combine the netbook and OS X trends with the Linux becoming increasingly easy to use for novices and a worldwide recession, and one has problems brewing for Microsoft. Not fatal problems, to be sure, but problems nonetheless, and problems whose solution is not obvious.

  • by abigor (540274) on Saturday November 08, 2008 @07:10PM (#25690799)

    While I too am hopeful of MS's comeuppance, at least to some degree, their share price is largely a reflection of their shitty dividend policy. MS hasn't accepted the fact that they are now a value stock, like any other blue chip, and not a growth stock. They need to raise their dividends to reflect this, or the market will continue to punish them.

  • by Firethorn (177587) on Saturday November 08, 2008 @08:24PM (#25691207) Homepage Journal

    Microsoft is regarded as a utility stock these days - in a recession, people still need computers as they aren't the luxury item they once were.

    I'd argue that anybody doing this is making a mistake. Utility stocks tend to be stable because it takes some massive changes for somebody to use less water, fewer kwh, lower amounts of gas during the winter, etc...

    In comparison, not paying the microsoft tax is rather easy. Simply stop buying a computer every 2 years, extend it to 3. If you're on a 3-4 year schedule, extend it a year or two.

    Don't buy the vista upgrade. Consider Linux for your business.

    Microsoft is about as much a utility as a car manufacturer - sure, it's tough in most areas to give up your vehicle, but nobody's preventing you from going to a different company.

  • Re:You should not. (Score:3, Insightful)

    by Free the Cowards (1280296) on Saturday November 08, 2008 @10:08PM (#25691729)

    Why does an effectively untraceable pseudonym confer any more credibility than being explicitly anonymous?

  • by Colin Smith (2679) on Sunday November 09, 2008 @08:42AM (#25694063)

    In consumer electronic stores there are $350 Laptops (after rebate) with Intel Graphic chips and 2G of RAM a 120G HD. that run Vista and cost less than a Netbook

    Handbag?

    Or is it 30cmx30cm, weighing in at 3kg?
     

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