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Wednesday, December 11, 2002 |
"Microsoft Wages Quiet Campaign Against Free Software", WSJ, December 9 2002.
[Categories: Market Definition, Microsoft, Other (Incentives)]
P.S. Incentives part is that Microsoft claims that distributors will have little incentive to sell freely available software... What do you think about their argument?
6:44:37 PM 
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Tuesday, November 19, 2002 |
I'd like to thank Adam Kornick for this funny clip of Steve Ballmer eloquently emphasizing the importance of developers to the Microsoft OS.
4:12:49 PM
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Microsoft's Margins. Check out Microsoft's margins broken down by business segment: see Note 9 on their most recent 10Q SEC filing. (In case you experience problems linking directly to the 10Q report, go to SEC Edgar search engines and type in Microsoft and click on their most recent 10Q dated 2002-11-14, then click on file d10q.htm.)
I've cut-and-pasted the most relevant bit here.
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Three Months Ended Sept. 30
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Revenue
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Operating Income/(Loss)
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2001 |
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Client |
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$ |
2,076 |
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$1,708 |
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Server Platforms |
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1,330 |
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350 |
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Information Worker |
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1,932 |
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1,476 |
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Business Solutions |
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74 |
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(39 |
) |
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MSN |
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431 |
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(199 |
) |
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CE/Mobility |
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14 |
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(48 |
) |
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Home and Entertainment |
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236 |
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(68 |
) |
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Reconciling Amounts |
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33 |
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(283 |
) |
| |
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Consolidated |
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$ |
6,126 |
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$2,897 |
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2002 |
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Client |
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$ |
2,892 |
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$2,482 |
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Server Platforms |
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1,523 |
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519 |
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Information Worker |
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2,385 |
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1,879 |
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Business Solutions |
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107 |
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(68 |
) |
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MSN |
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531 |
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(97 |
) |
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CE/Mobility |
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17 |
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(33 |
) |
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Home and Entertainment |
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505 |
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(177 |
) |
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Reconciling Amounts |
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(214 |
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(455 |
) |
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Consolidated |
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$ |
7,746 |
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$4,050 |
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The Client segment includes revenue and operating expenses associated with Windows XP Professional and Home, Windows 2000 Professional, Windows NT Workstation, Windows Me, Windows 98, and embedded systems. Server Platforms segment consists of server software licenses and client access licenses (CALs) for Windows Server, SQL Server, Exchange Server, Systems Management Server, Windows Terminal Server, and Small Business Server. It also includes BackOffice/Core CALs, developer tools, training, certification, Microsoft Press, Premier product support services, and Microsoft consulting services. Information Worker segment includes revenue from Microsoft Office, Microsoft Project, Visio, other standalone information worker applications, SharePoint Portal Server and CALs, and professional product support services. Business Solutions includes Microsoft Great Plains; bCentral; and the newly-acquired Navision. MSN includes MSN Subscription and MSN Network services. CE/Mobility includes Pocket PC, Handheld PC, other Mobility, and CE operating systems. Home and Entertainment includes Xbox video game system; PC games; consumer software and hardware; and TV platform.
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Margins, then, calculated as in class (p-MC)/p corresponds roughly to (REV-COST)/REV:
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SEGMENT |
2001 MARGIN |
2002 MARGIN |
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Client |
82.27% |
85.82% |
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Server Platforms |
26.32% |
34.08% |
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Information Worker |
76.40% |
78.78% |
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Business Solutions |
-52.70% |
-63.55% |
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MSN |
-46.17% |
-18.27% |
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CE/Mobility |
-342.86% |
-194.12% |
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Home and Entertainment |
-28.81% |
-35.05% |
According to our discussion in class, we expect Microsoft to reap high sustainable profits in markets where they dominate the market and enjoy a strong network externality do to developers' incentives to write software for the dominant platform. So it's no surprise profits are high in Windows and Office. On the other hand, is it any surprise that profits are lowest in PDAs, where Palm provided a potentially viable threat to the Windows programming platform? I'm less knowledgeable about MSN, servers, business solutions, and home & entertainment. But to the extent that network externalities are strong in these segments and monopoly power with high barriers to entry is a real prospect, it makes sense for them to endure losses today in these segments. (Some of the media coverage seems to suggest that Microsoft would not be a viable business without being able to exercise their monopoly power -- "they can't make money in any other business than Office and Windows!" -- but this ignores the fact that Microsoft may be losing money in these businesses for the express purpose of maintaining / extending that market power.)
[Categories: Demand (Network Externalities), Microsoft, Other]
4:01:47 PM
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Friday, November 08, 2002 |
"The $199.86 Solution: Microtel's bargain-basement PC is OK for basic computing, but face it -- the Lindows O/S is a major trade-off", BusinessWeek November 11, 2002.
[Categories: Demand (network externality in O/S), Market Definition, Microsoft]
3:55:06 PM
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Tuesday, October 01, 2002 |
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Thursday, September 26, 2002 |
"Microsoft Unveils Media Software", WSJ September 5, 2002.
"The [media] software is a `strategic entry point' for Microsoft into the more traditional markets":
--1-- "Technologies that are showing up in this product first could easily end up in other offerings."
--2-- "Microsoft has an advantage since it can bundle its digital-media offerings with its other, often-dominant software."
[Categories: Costs (Economies of scope), Demand (Network externalities), Microsoft, Price Discrimination (Bundling)]
2:30:50 PM
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Thursday, September 12, 2002 |
"Pilot Error: How Palm Tumbled From Star of Tech To Target of Microsoft", Wall Street Journal, September 7, 2001. With Figure on profits, etc.. and Figure on Palm's market.
A related story seems to suggest that Microsoft made the same mistake at Palm in 3Q 2001, "Report: PDA Sales Plunge in Q3 - Waiting for Microsoft?", Wireless NewsFactor, November 5 2001.
While most such articles focus solely on how Palm & Pocket PC market share has varied over time, this article also makes an interesting product differentiation point: "The [Dataquest] study notes that, in the enterprise, Palms are seen as lower-end devices best suited for managing appointments, tasks and contacts while Pocket PC devices have more e-mail capabilities and interact better with both standard and custom office applications."
[LINK: dynamic aspects of demand (8), network externalities (7)]
3:38:32 PM
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© Copyright 2002 David McAdams.
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