~e; Micro$oftware

[human being <human@electronetwork.org>]

// having read recently of a software donation
// said to be worth nearly a half-billion dollars,
// i wondered how much material and labor cost that
// the donated software was really worth. given this
// article, actual worth may be considerably less.
// and, to note, that Microsoft just settled its
// lawsuit of years with help from the US government.
// whose best interest is this in, public or private?

Microsoft shows 85% profit margins for Windows
By Paul Abrahams in Las Vegas

Published: November 17 2002 13:53 | Last Updated: November 17 2002 14:08
http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/ 
FullStory&c=StoryFT&cid=1035873352050&p=1012571727088

Microsoft has revealed for the first time that it has made profit  
margins of 85 per cent on its Windows system while its remaining  
businesses made losses, raising questions about the benefits of the  
group's costly efforts at diversification.

The client division, which markets Windows, generated operating profits  
last quarter of $2.48bn on revenues of $2.89bn, implying margins of 85  
per cent.

The disclosure of its profitability, released in an SEC filing late  
last week, will infuriate many rivals. Microsoft was found guilty of  
illegally maintaining its monopoly in personal computer operating  
systems in 2000.

A subsequent settlement between the Department of Justice, nine US  
states and the company was widely criticised as being too lax.

Nine other states tried to have greater constraints placed on the  
company. But on November 1, their proposals were largely ignored by the  
district court in Washington DC, which formulated the eventual remedy  
and almost all the DoJ settlement.

Among Microsoft's other businesses, the home and entertainment di  
vision, which includes the Xbox games console, lost $177m in the  
quarter on revenues of $505m. Salomon Smith Barney estimates it loses  
about $120 on each console it sells.

MSN, the internet service provider and portal, lost $97m, down from  
losses of $199m in the same quarter last year, on revenues up from  
$431m to $531m.

The business solutions group, which provides software for small and  
medium-sized businesses and includes recent acquisitions Great Plains  
of the US and Navision of Denmark, lost $68m on revenues of $107m.

And the CE/Mobility division, which includes mobile telephone software  
and the Windows CE operating system for handheld computers, lost $33m  
on revenues of $17m.

Bill Gates, Microsoft's chairman, speaking yesterday in Las Vegas at  
Comdex, America's largest information technology conference and show,  
warned that investors and pundits were becoming too pessimistic about  
the prospects for innovation in the information technology industry.

The IT industry was struggling, but the rate of innovation and the  
industry's rate of growth were being underestimated.

A transition was taking place where the personal computer was becoming  
less important than personal computing.

Computing would increasingly be used in the home, at the office and on  
the move in devices other than personal computers.

Moreover, the economics of the IT industry was changing as technology  
continued to become increasingly affordable. He said Dell, the world's  
leading PC maker, intended for to enter the market for pocket PCs -  
fully functional PCs in a small format - costing $199, well below the  
prices of existing pocket PCs.

Similarly, the cost of server technology using Microsoft's Windows  
operating system was also rapidly falling. As technology became  
cheaper, so it would become increasingly pervasive.

copyright 2002 Financial Times.
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