Why Microsoft Gets A Hard Time

Brian McCallister gives a brief synopsis of Microsoft’s 2005 financial statement. I think it pretty clearly shows why people dislike Microsoft:

Regarding Windows sales and profits:

Well, we see a pretty nice top line revenue of $12.2 billion. The fun part of that is that the operating income (profit before taxes and interest) is a tidy $9.4 billion. It is awfully nice to pull a 77% operating margin (profit before taxes, hereafter referred to as “profit”). Regarding Office sales and profits:

This one has slightly slimmer profit margins, only 71.8% profit on $11 billion revenue. See that’s called price gouging.  

It is of course nice to look at the non-monopoly business divisions as well. MSN is squeaking out a pretty respectable (20%) profit, with $2.2 billion in revenue and $405 million in profit. Servers have a very respectable margin as well, about 33% on $9.9 billion revenue. Both are very nice from a profit perspective It would be interesting to see what other company’s profit margins on software are, but I suspect they would be closer to the 20% or 33% from the non-monopoly products than the 70-80% of the monopoly products.  Of course, Microsoft isn’t the only ones pulling this kind of stunt – I’d be surprised to find that Apple wasn’t making a very large profit margin on off-the-shelf copies of OS X either, however Microsoft is making 80% of it’s Windows profit from the discounted prices given to OEMs.  Yikes!

Somehow though I don’t think we’ll see Microsoft giving its customers a price cut any time soon though. Then again, I probably wouldn’t if I were them either.