"Extrapolating from Gates’s implication of about a $12B-per-year burn rate, MSFT’s cash reserve gives it about 20 months of burn time at this point...I'm pretty certain from their recent behavior that Microsoft’s own planners aren’t giving the company more than 30 months to live without one of..."
These parts makes it sound like Microsoft is in the red when in reality they are making enormous profits, just not as much as they'd like. That 20 month figure assumes zero revenue.
Legacy customers, in particular in the corporate IT world, will ensure that Microsoft will retain its profitability long after it loses its stock value and its relevance (already it has lost a great deal of its relevance, but it still has much further to fall).
ESR has a long history of wishful thinking regarding the demise of Microsoft. Ten years ago he was saying:
"""Windows 2000 will be either canceled or dead on arrival. Either way it will turn into a horrendous train wreck, the worst strategic disaster in Microsoft's history.""" -- http://catb.org/~esr/faqs/hacker-revenge.html
> Legacy customers will ensure that Microsoft will retain its profitability long after it loses its stock value
Absolutely. Microsoft's downfall (if it happens) will be from industry-controlling colossus to large and profitable software and services vendor.
I really didn't like the blog post, it looked more like wishful thinking than reasoning with facts. Microsoft is clearly going nowhere in this recession, I would say it is one of the companies along with Google that will come out stronger than it was. Microsoft's competitors are already feeling the recession pinch and might find it very hard to survive. Also with cash-reserves of Microsoft, I surely think they will be buying valuable companies for cheap. Again have to wait and see, no one has seen the future including Eric Raymond.
Also just read his previous blog post about Israeli offensive in Gaza. Eric Raymond surely has some extreme views on the conflict, saying things like Islamofascists and other things. I was a fan of Eric Raymond but i surely didn't know he was a right-wing nut.
Netbooks are nice, but they are not taking over the market anytime soon. A certain category of people have always wanted small cheap notebooks, and now that they are available, they are buying them. The old consumers who purchased normal notebooks will continue to do so.
Netbooks sell well because they are cheap and small. They are useful for particular tasks in this configuration, but not for others. The market is changing, but not towards netbooks exclusively. What people want, and don't get yet, and will jump to purchase when they come are:
- Very thin notebooks that are very cheap, but have 15 or 14 inch screens
- Very thin and small notebooks than have 12 inch to 10 inch screens, and are very cheap
If any of the above is above 700mhz in speed, it's fine, as speed is not the main criteria for the bulk of people. The third category of people want
- the same as above, but with lots of ram and speed for video editing, photo editing work
All 3 classes want an automatic connection to flat screen screens at 32 - 30 inch at home, auto connection to external mouse and keyboard.
Current style notebooks as well as all categories of desktop computers are not wanted, they are just taken because they are what is available. Nobody wants a large box sitting underneath his table, it just happens to come in that form factor.
Netbooks fulfill a part of the above, and that's why they are selling. They will not stay low end forever.
"Clayton Christensen, author of The Innovator’s Dilemma concluded six years ago that Linux and open source seemed to be executing a classic low-end disruption on Windows and closed-source technology."
Yeah, and he turned out to be right. Now, only 6 years later, nobody uses Windows and everyone uses Linux.
I love how he uses a prophecy that has totally failed to occur at all as the starting point for rehashing the same prophecy.
First of all, he said Linux and open source. Open source has definitely disrupted, most notably on the desktop, Internet Explorer's monopoly. Also, LAMP and others have done rather well against MS on the server (although this would have been more retrospective than prediction even 6 years ago).
As far as Linux on the desktop goes, it's too early to call failure. Six years is not exactly an eternity. But in that six years, Linux has become much more user-friendly and easy to install, major vendors like Dell have started selling it pre-installed, MSIE has lost its dominance (which is important because you can now use the internet without running into MSIE-only sites now), webapps have made the OS less important, and the netbook thing is happening, reducing prices to formerly unheard of levels, making the price differential between Windows and Linux that much more important.
Call failure when the marketshare of Linux stops growing at the expense of Windows.
Here are some stats: Linux's numbers are low, but growing.
That looks about the same as it would have 6 years ago. It's still mostly Windows, then Mac OS. In fact, I'm surprised OSX hasn't grown to more than 5.
Open source hasn't stopped Microsoft or even slightly slowed their growth. The only thing that's had any noticeable effect is the recession.
You can't deny mini-computers did LED on mainframes, then networked PCs did the same to minis and x86 Windows desktops LED-ed RISC Unix workstations into oblivion.
Free software and web applications look, indeed, a lot like a low-end disruptions into Microsoft's software business. Just because ESR predicts Microsoft's demise since ever, it doesn't mean it won't happen one day.
Still, I think Microsoft will become a very different company in the next five years.
IBM has a culture of cyclic change. Every 20 years its a different company, and it has been changing constantly through it 100 year history. IBM has seen many great CEOs through history.
Microsoft still relies on essentially the same business model (a software-product company.) essentially the last 30 years. It is trying to diversify, yes, but most of its money still comes from Windows and Office.
Someone said a company is truly great when it has made it to the 3rd great CEO. How many CEO who had the ability and the vision to reinvent the company has Microsoft had?
> How many CEO who had the ability and the vision to reinvent the company has Microsoft had?
By my count they are stuck at two.
Jon Shirley, who was credited with taking a very young Microsoft and creating the proper corporate structure to stear it through its IPO and allow for its explosive growth.
and of course Bill Gates, who is one of the pioneers and visionaries of the PC age. He took the company from 800 million a year in revenues to 22 billion in revenues.
I wouldn't include Steve Balmer in the mix but that is of course up for interpretation
Windows has had 64 bit versions available since XP. Just like Linux. Hell, I'm running vista 64bit on my desktop (well, I can dual boot into it) right now.
I'm already running 64 bit Windows and while it was terrible when it came out, it's basically well supported now. What do you mean, 64 bit as standard?
Are netbooks making any penetration into the corporate market? I think Eric Raymond's timeline of "unless something surprising happens in the next 30 months, Microsoft is toast" is too aggressive.
>The big issue, however, is that Netbooks are not being bought as computer replacements
PCs weren’t bought as minicomputer replacements, either. This did not prevent them from executing a classic low-end disruption on minicomputers. You should study that concept.
In fact PCs were bought as minicomputer replacements after their performance caught up, and that is the classic disruption pattern. The difficulty of netbooks penetrating the corporate environment isn't just performance, it's also a combination of the desktop form and the support that corporations want.
Soon, netbook performance will become comparable with laptops, but that alone won't make Microsoft's empire fall. In time it is likely that the same commoditization happens to the corporate market. It just won't be with netbooks, and not as fast as Eric Raymond would like.
"Soon, netbook performance will become comparable with laptops"
I have been using a netbook as my main desktop and the only complain I had was with it being really tiny (something quickly offset by me having to carry it). When I am at home, I use an extra screen/keyboard/mouse.
Sure it's no screamer, but it is a more than adequate development (Emacs/Python/Django/Plone) machine.
It's interesting that ESR implies netbooks are an endpoint. Replacing his opinion with mine, they're not. In general, laptops are still too expensive and heavy, and phones still haven't caught up in functionality/cost. My netbook is a stopgap measure, and it works because I do most of my work on bigger hardware; when I replace it in a few years, I won't be looking to replicate the experience.
Quick math: if the burn rate is $12bn/year, and there are a (handwavy) billion Windows || Office licenses bought or renewed each year, that's $12 per license to break even -- and that's excluding revenue from Sharepoint etc. Pricing on both products can fall quite a bit before they're in the red.
And it probably won't matter, if the home PC goes the way of the landline phone. I assume that's the market ESR is concerned about, anyway.
This entire essay hinges on the assumption that Microsoft's priced Windows (and Office?) inefficiently. Implicitly, it may also hinge on the presumption that the true dollar value of OS software is basically zero.
I'm not so sure on the first, and I know the second is plainly false. For the average consumer, the switching cost associated with moving from Windows to Linux is quite hefty relative to buying a new copy of Windows 7...
So what's the cost for the average consumer of moving from Windows to GNU/Linux or MacOS X?
I guess Microsoft probably sells more licenses to BigCo than to natural persons these days, and for them the switching cost probably is non-negligible, owing largely to investments in custom Windows software. Maybe when you say "consumers" you have in mind a random sample from all Windows customers.
As for "consumers" in the vernacular sense of natural persons, I think the cost of switching from Windows to MacOS X or GNU/Linux is not more than the cost of moving from Windows to Windows. The main thing I've seen is that they have to copy their data from one machine to the other, and/or decide what to throw away. The second major cost is relicensing their old apps, which they do anyway because they might as well upgrade.
There is no such thing as an average consumer. There are power users who use a bunch of little Windows-only shareware applications, who would truly be in for some pain as they had to relearn everything if they switched to Linux, and then there are people who just use Firefox, who would hardly notice the difference.
Why would you lose files because you switch to Linux? When I switched I just put my old windows hard drive in my computer and copied them - which is the same thing I would have done with a new Windows installation.
I don't know if that's still possible. That was in the FAT32 days. But I'm sure that it's still possible to transfer files from one computer to another.
At the expense of Window 7's market penetration, which I imagine is the primary concern right now. They need the latest OS version to be a necessity, not a luxury.
MS has pretty standard schedules on which they "discontinue" software, and it's not short. MS would like to stop selling XP now, that's likely to happen when Windows 7 ships, unless there's a commercial reason not to.
As for support, wikipedia says "Windows XP Service Pack 2 will be retired on 13 July 2010, almost six years after its general availability ... On 14 April 2009, Windows XP will begin its "Extended Support" period that will last for 5 years until 8 April 2014"
For once Eric gets it wrong (IMHO). "The death of Windows has been greatly exagerated".
He basically assumes that Microsoft will do $0 in revenue soon, which is so unrealistic that it destroys the whole argument.
What's funny of course is that if you believed in his argument that a recession will hurt OS companies that charge too much for an OS, then Apple should be in even worse shape than Microsoft. Not quite.
Eric fell in the tempting fallacy of drawing two points on a chart and assuming that you can draw a line to extrapolate. Linux is free and growing, Microsoft charges money and is losing ground. Therefore eventually Microsoft will die. Now try to add Apple to that chart and see how well extrpolation works...
IMO the one thing that could kill Windows would be if Apple released OS X on other platforms. I do plan on buying a Mac, however it may end up being a couple of years, but if OS X was released for all Intel computers then I'd definitely download a copy and have it in dual-boot, which could take me away from windows long enough until I got a Mac. Or even then I'd consider buying a Linux version from Dell and install OS X (it'd probably still be cheaper than going with pre-install windows).
Making OS X support that much hardware is just as hard as Linux supporting that much hardware, only with significantly fewer engineers available to do the task.
My Dell laptop has identical components to most MacBooks, so I'd say 90% of the drivers OS X already supports would be involved in my Laptop.
It doesn't necessarily have to support every variant. I just mean it would be amazing if Apple struck a deal with Dell so that OS X could run on their laptops. However, I think Apples decision to support outside hardware will likely be an image thing over a cash thing. If Apple compromises its image then it could potentially compromise their entire business.
These parts makes it sound like Microsoft is in the red when in reality they are making enormous profits, just not as much as they'd like. That 20 month figure assumes zero revenue.
Legacy customers, in particular in the corporate IT world, will ensure that Microsoft will retain its profitability long after it loses its stock value and its relevance (already it has lost a great deal of its relevance, but it still has much further to fall).