02-06-2003, 05:00 AM
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Executive Editor
Join Date: Aug 2006
Posts: 29,160
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Microsoft Warns Of Open-Source Pricing Threat
"Microsoft warned in a recent Securities and Exchange Commission filing that it may be forced to drop the price of its software because of the threat of open-source software. "The popularization of the open-source movement continues to pose a significant challenge to the company's business model, including recent efforts by proponents of the open-source model to convince governments worldwide to mandate the use of open-source software in their purchase and development of software products," Microsoft said in a 10-Q report for the quarter ending Jan. 31."
Now here's something interesting - Microsoft is essentially saying that they're going to have to reduce the price of their software to compete with Open Source solutions and thereby make less profit. I'm no market expert, but I assume they're doing this to avoid the stock drop that would occur if Microsoft announced they were cutting the prices of their software by 30% and would therefore earn 30% below their earnings goal. This assumes, however, that volume would remain static if prices were dropped. I don't think they would - I think there's a pricing sweet spot for Office XP and Windows XP where people would upgrade easily. This volume in turn might compensate for the lower prices...which would allow Microsoft to announce better than average profits after having lowered them previously.
And there you have my very rudimentary understanding of the market. What's your conspiracy theory? 8)
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02-06-2003, 05:12 AM
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Pontificator
Join Date: Mar 2002
Posts: 1,329
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Here's the thing. As you said. IF they drastically dropped the price of their 2 juggernauts: Office and Windows that more people would be willing to shell out more for more copies.
I think companies, and the RIAA and MPAA, have a hard time realizing this. The question is what is that "sweet spot"?
But there is also the fact that people don�t like product activation and DRM which Windows and Office uses to varying extents. Just dropping the price of the dynamic duo isn�t going to solve this. There would have to be a fundamental change in how well MS plays with its competitors something they just don�t like doing. *shrugs* My 2 cents.
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02-06-2003, 05:20 AM
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Intellectual
Join Date: Feb 2002
Posts: 134
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As I said before in response to something about how Microsoft was going to "beat Linux", you can't beat Linux. Linux is free. Well, the retractors must now realize that Linux (and open-source in general) does have a significant pull on the market. Microsoft can't squash Linux. You can't even buy it out, really. As Microsoft likes to call it, open-source is like a virus that can't be stopped. Sure, Microsoft can still compete with it, but some people think that Microsoft will eventually defeat Linux. I disagree.
But anyways... This news is just confirming what is obvious to almost everyone in the tech industry Microsoft products cost too much.
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02-06-2003, 05:20 AM
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Pontificator
Join Date: Mar 2002
Posts: 1,329
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PS- There is also the damaged image of Microsoft. Whether its true or not is irrelevant. When you say the word Microsoft and business people think hard ball tactics, bullying of OEM's, and generally doing anything they can to make a profit. Right or wrong it�s the image MS has and something they need to fix. How they going about doing that _MIGHT_ mean lower profits by pulling back from their hardball tactics.
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02-06-2003, 05:31 AM
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Executive Editor
Join Date: Aug 2006
Posts: 29,160
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Quote:
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Originally Posted by Jonathan1
But there is also the fact that people don�t like product activation and DRM which Windows and Office uses to varying extents.
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I've been using Windows software with product activation for over a year now, and I've never had any sort of problem. I think the people who complain the most about product activation are the people who liked getting "free" copies of Windows and Office from work, their friends, etc. What I'm hoping is that if the price drops on Windows and Office, more people will buy them...
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02-06-2003, 05:35 AM
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Pontificator
Join Date: Mar 2002
Posts: 1,329
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Robotbeat,
How will MS compete with Linux?
Its called Palidum (Or however you spell it.) If MS can implement this in hardware and software before Linux or Apple take a large chunk of the market they could actually lock Linux out from working with Trusted Computing hardware and software. A price drop right now would be an attempt to hold off Linux while they implement Palidum .
This really is a war. With battle plans and tactics. Linux has done a good job by countering with making their �stuff� compatible with Windows�to a certain extent. Windows is moving into closed hardware (Witness the Tablet PC.) and eventually fritz chip enabled hardware.
The next 2-4 years are going to be interesting. The thing that could bring everything crashing down on Linux is if the gov ever intervenes by requiring every puter to use trusted PC components or requiring DRM in all OS�s which would be a major victory for MS. Not likely but its possible. After the DMCA...I believe anything could happen. :? A possible price drop is only a response for the time being. But you are right. Free is free.
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02-06-2003, 05:40 AM
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Pontificator
Join Date: Mar 2002
Posts: 1,329
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Quote:
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Originally Posted by Jason Dunn
I've been using Windows software with product activation for over a year now, and I've never had any sort of problem. I think the people who complain the most about product activation are the people who liked getting "free" copies of Windows and Office from work, their friends, etc. What I'm hoping is that if the price drops on Windows and Office, more people will buy them...
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I've had Office deactivate on me occasionally on my laptop. I'm still trying to figure out why. I found a work around with creating an SMS installer package to backup the activation files and reg entries so if this happens again I can just run the package.
Windows has deactivated on me twice in the last year. First was when I added my SCSI Jazz drive and Geforce 4. The second time was after adding a new sound card after X-Mas...It does occur. *shrugs*
Edit: Sound card and an extra 512MB of RAM
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02-06-2003, 05:42 AM
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Pupil
Join Date: Nov 2002
Posts: 31
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Re: Microsoft Warns Of Open-Source Pricing Threat
Quote:
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Originally Posted by Jason Dunn
And there you have my very rudimentary understanding of the market. 8)
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It's pretty much spot on Jason. This is what it means by price elasticity in microeconomics. You are hoping that a small drop in price will bring in more sales in quantity so that your total revenue increases. This means that the product is at a pricing that is very elastic.
If you want to increase revenue by increasing the price, you want your product to be price inelastic; as the price increase will not substancially reduce your sales quantity so that will affect your total revenue.
So the billion dollar question is "Are MS products price inelastic or elastic?"
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02-06-2003, 05:52 AM
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Pupil
Join Date: Mar 2002
Posts: 21
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Honest consumers
I have to agree with both of Jason's posts, in that I think that lower prices for Microsoft products will bring in a larger number of customers.
Most consumers are honest in my opinion, and are willing to pay a fair price for what they want, and lowering the prices increases the number of honest Microsoft customers (who will probably be repeat customers because of the lower price and convenience of upgrades).
Those who are semi-honest will probably buy instead of trying to hack product activation features.
Purchasing a legitimate product also entitles you to support. Although feelings about MS's support may vary, when I upgraded the BIOS on my motherboard and was forced to reactivate my copy of windows, it only took a two minute call to resolve (even though I am an American living in Japan). Toll free I might add. So it was annoying, but not a real problem.
Put the three together and I think that Microsoft and consumers win in the short run. In the long run Linux might become popular enough to take the lead, but the best part is that all of this competition makes for better products at lower prices. 8)
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02-06-2003, 05:55 AM
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Intellectual
Join Date: May 2005
Posts: 215
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I'm sorry, but I find this really funny. Thanks for giving me some "light" to my day.
Now, Jason seems to be right, if I read him correctly (Hey, Im tired)
Lowering the cost of the product does not necessarily mean lower cost, because people are more likely to buy. Especially MS products, since they are overpriced to begin with IMHO. Case in point, the Academic edition of Office selling like hotcakes.
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