Microsoft Loses $435 Million in Netbooks

Feb 23, 2009

According to current figures from Netbookdigest.com, Microsoft has lost $435,000,000 over the last year in netbook sales.

While Microsoft has maintained about 90% of the desktop and notebook market, netbooks come in at only 70%. Part of the reason is Linux, but part is Microsoft itself.

Netbook Digest calculated approximately how much Microsoft lost in the netbook market. Linux as its competitor was responsible for about $75 million in losses, not terribly scathing for Microsoft. But the figures begin to mount significantly when you consider the cost incurred for XP's lingering domination instead of the hoped for Vista (which accounted for less then two percent of the netbook market). Netbook Digest's calculation was based on a per unit loss of $36 due to XP, multiplied by 10 million netbooks sold in 2008, making $360 million. Add to that the $75 million lost to Linux and you get the $435 million.

An improvement in this respect is still not in sight for 2009. Windows 7, Vista's replacement, is due out earliest 2010.

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Comments

  • Microsoft marketing dollars

    Allen is correct. The numbers presented are bunk.

    However it is still imaginable that Microsoft is spending more to put XP on netbooks than it costs to produce XP. This is because it is standard Microsoft practice to provide kickbacks to manufacturers in return for promoting the Microsoft brand. This includes everything from "Made for Microsoft" stickers to insisting that every advertisement contain a Microsoft sales pitch.

    "Marketing dollars" are the carrot. The stick is the threat of refusal to license MS products.

    These deals are always secret. We'll probably never know.
  • Agreed

    Got to agree with Allen, those numbers are for all intents and purposes, male bovine excrement.
  • Flawed logic

    This is the same flawed logic used by the entertainment industry in estimating losses due to downloading of digital media. They assume that every netbook sold with Linux or Windows XP on it would automatically translate into the sale of a more powerful machine running Vista if those alternatives were not available. It is much more likely that Microsoft suffers no losses from the sale of netbook computers, only a theoretical reduction in potential profits from those consumers who would purchase a system running Vista if netbooks were not available. On the other hand, the smaller profit made on netbooks running Windows XP probably exceeds those reductions, as it is likely that many more consumers would choose netbooks running Linux over more powerful computers running Vista if netbooks running Windows XP were not available.

    The only way in which one could legitimately claim that Microsoft was suffering any losses due to the sale of netbooks is if Microsoft were providing Windows XP to netbook manufacturers at a price lower than the cost of production. But since Microsoft's cost in providing Windows XP to the manufacturers amounts to little more than the cost of producing and shipping the master CDs or DVDs used by the manufacturers in their installation process (the original development cost was recouped long ago and there is little or no ongoing development cost as XP now has limited support), it is hard to believe that Microsoft is losing any money on the netbooks unless they are providing Windows XP to the manufacturers at no cost.
  • Some sales were not lost

    I have now bought 3 Linux netbooks but M$ has not lost any sales to me.
    I would not have bought them if they were only available with M$ Windows pre-infested.
    Life is too short for a little netbook to spend its time scanning for 20,000 M$ malware.
  • Windows 7 hope for MS? Ah... no.

    Somehow, even with the amount of positive feedback people have been feeding Windows 7 releases, I am far too sceptical to believe that it (W7) will have that much performance improvement.

    Either way, it's not GNU, nor GPL/Free Software, so big brother will still be watching over you.
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