My friends Pete (who doesn't have a weblog) sent me a link to this well-done editorial by David Pogue entitled "Profit and Innovation at Microsoft." (Free registration required.) Pogue's editorial susinctly and rationally gets to the crux of the matter. Having been on the receiving end of Microsoft's "innovation" more times then I care to remember, I appreciate can apprecaite this viewpoint.
Why does Microsoft bother me so? Because, in my view, its success relies primarily on this unique "you're our customer whether you like it or not" arrangement. If Microsoft won through the superiority of its products or the brilliance of its new ideas, I wouldn't resent its dominance one bit. (You go, Sony!)
But that's not very likely to happen. Beyond Windows and Office, when has Microsoft become the dominant player in a market it covets? It's either a distant second-place player or a complete loser in palmtops, digital music formats, online services, set top boxes, game consoles, phones and other areas it has set out to conquer, no matter how many hundreds of millions of dollars it spends. If Microsoft were truly the quality-driven innovator it claims to be, surely it would have claimed the #1 spot in some of these other categories.
Instead, according to an article this week in The Financial Times, the numbers tell the real story: Microsoft's Xbox game division lost $177 million last quarter, its MSN online service lost $97 million, its application-software division lost $68 million and its palmtop division lost $33 million. The only profits at Microsoft, in fact, came from its Windows monopoly money: $2.84 billion. (If there's any doubt that Microsoft is abusing its monopoly, that's an 85 percent profit margin.)
