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Microsoft is profiting from Linux From the "no it's not WinUx but.." files:
As Microsoft is set to pump up to $100 million more in Novell for Linux, it's important to note that Microsoft is not paying off Linux - it's actually making money from it. Microsoft isn't just buying Linux subscriptions from Novell to give away...it's buying them so they can sell them. So that means for the past 18 months, Microsoft has been selling Linux. How much Microsoft is actually making is difficult to determine. "We have purchased the Novell certificates, which enables customers to gain direct support from Novell for Novell SUSE Linux Enterprise and we take those certificates and sell them to customers," Susan Hauser, general manager for strategic partnerships and licensing at Microsoft, told InternetNews.com."We keep the pricing confidential since customer size and opportunity pricing varies. We do resell and redistribute the certificates as part of our engagement."But seeing as this is a blog let's do some simple math - as pure speculation - to figure out how much Microsoft may yield in direct Linux revenues. Let's start by assuming the total value of the Novell Linux subscription purchases is $340 million (and it may not necessarily be that in the end as it could be less - or more). Microsoft is reselling those subscriptions at a markup that should yield some kind of operating profit. To date in 2008, Microsoft has net profit margin of just over 29 percent. So doing the simple calculation ($340 million by 29%= X), Microsoft over the lifetime of the Novell coupon deal could profit by $99 million (or more) dollars. At that figure Microsoft would likely be one of the top Linux resellers on Earth. Yes there are a lot of assumptions in there and we don't know what the actual markup/margin is - but we do know that Microsoft is selling Linux and they are making money doing it. It just goes to show you that people will buy Linux - even from Microsoft. 1 TrackBacksListed below are links to blogs that reference this entry: Microsoft is profiting from Linux. TrackBack URL for this entry: https://swarm.jupitermedia.com/mt-tb.cgi/4467
» Coupons from Steve Capone from Boycott Novell
A roundup of news articles about the latest lump of SUSE coupons ... Read More 6 CommentsLeave a comment |
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Well, I think those are some major assumptions. I have heard that the discounts to customers are actually higher than what MS paid Novell. I would bet they are losing money or MAYBE breaking even. The goal for them is not to make money on Linux. It is to beat out RedHat and put in a Linux that is easier to manage (and thus replace) with Windows.
What's the Business Case for Microsoft and Open Source?
http://slashdot.org/comments.pl?sid=598579&cid=23987141
Not sure hit the nail on the head. The goal is a loss leader. They are NOT displacing windows, but they are displacing Red Hat, Unix, and unpaid linux. The certs are used heavily to take out Red Hat and Novell employees are pushing it as such.
Microsoft IS Novell's largest reseller of Linux by a VERY wide margin. The next largest purveyor SUSE Linux sells less than $2m/yr and they are a national distributor.
Susan Hauser's quote merely confirms that Microsoft is "selling" the certificates, it doesn't really tell us whether they're selling them at a profit. Microsoft is also "selling" Vista. Can we assume that Vista sales also have a 29% profit margin?
Also, why wouldn't MS's customers buy their certificates directly from Novell? Is it because MS's certificates are cheaper -- sold at a discount?
I think the big thing here is that MS has taken on the subordinate role of a "reseller". They're providing their customers with something that their customers want but are unable to provide in-house. I think that must diminish MS's image in the eyes of many customers.
Hi,
this article makes a great point!
This calculation, as flawed as it MUST be, shows one thing very clearly:
There is CLEARLY a market for Linux! And it is either BIG enough for Microsoft to take part in it now or PROMISING enough for Microsoft to invest for the future.
Does Microsoft still subsidize the Xbox? How big are the revenues of its "Search" business?
If Microsoft is making no money NOW in the Linux-Business, it is even better news, because then they see FUTURE profits there!
Dangerseeker
Ok, now I'm mad! Microsoft has no business dealing with our Linux. Weather they see it as there future or not. Who are you kidding when you say Microsoft isn't making any money off Linux. Simple law of economics for buisnesess your not going to buy dead chickens to sell there eggs. Microsoft sees our Linux as a big future threat so they need to take take and take some more like they have always done. We made Linux what is is today and WE should be the ones to take it into the future. As Linux users its quite simple, any Linux distros that Microsoft has there grubby little hands in the Linux user should drop that distro and find another version that Microsoft hasn't touched. Leave Microsoft up the creek without there paddles..... The end is very near for Microsoft and they know it to.....