7 Reasons You Can't Kill Microsoft

Many PC makers and their customers continue to push back against Windows Vista. Software as a service (SaaS) and open source are giving Microsoft fits. Yet, it's far too early to bury Microsoft. Here are seven reasons why the software giant's empire won't fall anytime soon.

1. Big Profits: Although profits fell 11 percent during Microsoft's most recent quarter, the company still generated $4.39 billion in net income during the period. That's roughly $49 million in pure profit every business day during a 90-day quarter.

In stark contrast, Red Hat's net income during its most recent quarter was $22 million. In other words, it takes Microsoft less than half a day to surpass Red Hat's entire quarterly profits.

2. Windows Installed Base: Some folks may hate Vista, but the operating system's installed base has grown to 140 million licenses, up from 100 million in January. That's impressive and pathetic, considering all of the folks who are downgrading to Windows XP or jumping to Mac OS X or Linux. But still, I have to concede that the Windows installed base continues to beat the competition by a wide margin on the desktop.

3. Managed Service Providers: Sure, MSPs and software as a service (SaaS) experts are embracing open source applications. But they're also flocking to hosted versions of Microsoft Exchange Server, Microsoft Dynamics and Microsoft SharePoint, notes Ingram Micro. In fact, many MSPs are buying up Microsoft software partners in a race to enter the SaaS market.

4. Server Applications: Microsoft's server and tools sales rose 18 percent to $3.3 billion, helped by the launch of new versions of Windows Server and other major software franchises, notes the Associated Press. Do some quick math, and it's difficult to find any other server-centric software companies generating more than $13 billion in annual sales while generating near-20 percent annual growth.

5. Independent Software Vendors (ISVs): Ultimately, Microsoft's primary customers are ISVs — the very folks who keep writing more and more applications for Windows. And even open source companies such as SugarCRM say they are more than happy to offer applications on Windows Server.

6. Market Fragmentation: Sure, Oracle has acquired numerous application providers. But generally speaking, Microsoft remains the only major software supplier that has a full arsenal of options — operating systems, tools, databases, application and online services.

7. Xbox Marks the Spot: Revenue from the division responsible for the Xbox 360 video game system ballooned 68 percent to $1.58 billion, which Microsoft attributed to robust demand for game consoles, noted AP. More importantly, kids (including my own) are hooked on the Xbox Live video game service. With any luck, Microsoft's business developers will steal a few pages from the Xbox Live online service experts.

Yes, Vista has missed the mark with many customers. And Microsoft will continue to take some lumps for the next few years.

But the Internet and open source were supposed to kill Microsoft in the 1990s. So far, all of those deadly blows were merely flesh wounds.

Disclosure: No position.

Comments

[Jonathan Scott:]

one big picture concern is the price of hardware is dropping so low, that windows software prices are starting to appear to be very high.

2008 Apr 29 12:36 PM

[brewer:]

#8: They were never really alive.

Public opinion is rapidly souring on MSFT. Anyone with a clue about technology has known for eons that they they are only good as thugs, and their technologies are for the most part, stolen from others.

2008 Apr 29 04:43 PM

[SingHash:]

#2: That 140 million figure includes downgraders.

Most PCs have Vista pre-installed. Even if a user downgrades to XP, MS still counts this as a Vista user. It would be more accurate to count the number of boxed retail copies that were sold.

2008 Apr 29 07:59 PM

[brewer:]

Ah, there's the rub. Practically no one ever buys a boxed copy of Windows, even the popular releases. They want some totally unbelievable price for it, but they provide it for around $50 to the hardware vendors. Anything to keep the monopoly going... as always.

2008 Apr 30 12:28 AM

[mlambert890:]

Ha... OK Brewer and SingHash... You guys are right. MSFT is dead and was only ever a rackateer. You make that bet, and Ill bet with Joe and we'll see what happens. I think some are so ideological on this issue (for some bizarre reason) that it totally clouds any ability they have to think rationally. Some people in technology take it WAY too seriously and, sorry to be cliche, really need a life.

2008 Apr 30 08:01 AM

[Alex Filonov:]

All empires died of internal reasons. MS is no exception. It will live or die because of internal reasons. Company is making huge money, no question here. Even keeping in mind accounting tricks: revenue is recognized when boxes or licenses are shipped to the reseller, not when they are sold to end user. So, 140 million Vista licenses is not exactly an installed base. More accurately, it's a number of licenses currently shipped to hardware manufacturers plus number of boxes shipped to retailers. Installed base is a real mystery.

Anyway, company makes money. It will survive and maybe even thrive if it won't make some stupid moves. Like buying Yahoo!

The main thing for us, investors, is whether MSFT will makes money for us. The answer for last 8+ years is NO. The only way company might interest investors is if it becomes a value play. But that means increasing dividend to reasonable levels (3% at least) and stopping wasting money on the Web (1 billion a year is too much even for Microsoft).

2008 Apr 30 01:17 PM

[PK de C'ville:]

"Revenue from the division responsible for the Xbox 360 video game system ballooned 68 percent to $1.58 billion, which Microsoft attributed to robust demand for game consoles, noted AP."

Some people say that xBox is STILL in the RED. If true, revenue of 1.58B only inches them closer to begin taking some profit someday. xBox seems like it will be a good provider eventually, but maybe it's all smoke and mirrors.

BTW, have you noticed that none of the mentioned drivers has words like 'excellence' or 'quality driven' in them. Maybe msft has indeed excelled in thugery. I'm waiting for "The Sopranos - Seattle" to premier soon.

2008 Apr 30 05:13 PM

[srw:]

On the mobile side Microsoft still has a lot of space to grow. Currently it has a low market share of ~12% but windows mobile it's not that bad.

Comparing it with other alternatives like Blackberry, Symbian based and Mac OS X based (iPhone) I can say that from a developer & business perspective Microsoft is in a better position. iPhone SDK is promising but Apple (Steve Jobs?) try to kick developers instead of attracting them, they ask for paying $ 99 & $ 299 for entering the program... Symbian development is slow and Blackberry is so propietary. Google came up with Android but it's not a really open platform and you must develop in Java.

IMHO Apple can be a real competitor if they finally understand that developers are partners. Also somebody can build a Linux based platform with a really nice GUI, and good and fast developers tools.

2008 May 04 03:38 PM