Windows

Microsoft's Woes Can't Be Blamed on Vista

The personal good news for me recently was that one of my daughters is going back to college. The bad news: She wants a new laptop. Well, back when the economy and my stock portfolio were things of beauty, I would have said sure. But that was then. So I took a look at her old Dell Inspiron, figured out the costs of parts and additional memory, and got it running for about $100. That disappointed my kid but saved me a good $350 over the cost of a new machine.

Here's why I'm telling you this: Some analysts and even a news story here at Infoworld.com are blaming Vista for Microsoft's crummy second quarter and subsequent layoffs.

As much as I wish the folks in Redmond had done a better job building that dog of an OS -- and let us keep XP -- Vista is not to blame. As Bill Clinton used to say, it's the economy, stupid.

Slow PC Sales Sink Microsoft

Earlier this month, IDC totaled up fourth-quarter PC results and found that unit sales had declined by just under half a percent. This year, results will be worse, with sales off 5.3 percent, according to IDC.

Sales aren't off because buyers don't like Vista. Although I usually stay away from generalizing much from my personal experiences in the technology market, in this case, I'd say that my decision not to buy a new PC is probably right in line with that of many other non-buyers. Money is tight these days, and the flavor of the OS has nothing to do with it. Indeed, Mac sales are off as well, and we don't hear lots of complaints about OS X.

Having said that, I believe that if Vista had been a more successful product, PC sales would have been stronger soon after the OS debuted a few years ago. But had that sales surge come about, it would have flattened out by now.

The overall math is simple. Sales in the client division, which includes Windows, were off 8.1 percent while sales in the business division, which includes Office, were up just a bit: 1.3 percent. And since Windows and Office are the company cash cows, the quarter stank.

See the numbers for yourself.

Netbooks Steal PC Profits

Meanwhile, sales of netbooks are up. And despite earlier thinking that the low-priced machines will be supplements, not replacements, for more powerful computers, it isn't exactly working out that way. And remember, netbooks generally don't run Vista.

Microsoft doesn't disclose OEM pricing, but it's likely that netbook makers like Acer are paying significantly less for XP on their lean machines than they'd pay for Vista on a more powerful system. A recent story in BusinessWeek indicates that computer makers pay about $50 for Vista versus about $13 for XP on a netbook.

I can't verify those numbers, but they make sense. After all, Windows is generally the most expensive item on a bill of materials, and since netbooks are so cheap, the percentage of costs allocated to the operating system can't increase very much.

That's good news for Acer and netbook buyers, but not such great news for Microsoft, which loses out by not selling a higher-margin product to the PC maker. Similarly, Intel, which sells the relatively cheap Atom CPU to the netbook makers, is hurting as well.

Add it up. Vista is not the culprit. And with all due respect to the analysts and the writers who quoted them, you're wrong.

(Disclosure: I own a small number of shares in Microsoft.)

I welcome your comments, tips and suggestions. Reach me at bill.snyder@sbcglobal.net.

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