The Royal Pingdom reports that Microsoft’s Windows 7 has just overtaken Windows XP as the top operating system in the US. The article cites stats from StatCounter that say as of April 7, Microsoft Windows 7 reached a 31.71% of share, while Windows XP held a 31.56% share.
On a global scale, StatCounter reports that Windows XP still enjoys a significant advantage of 16.1% over Windows 7.
The Business Insider noted that investor Roger McNamee a man who Bill Gates credited as a sounding board for his 1994 book “The Road Ahead” told CNBC that Microsoft’s Windows is a dying business.
I think Microsoft Windows, this is the cycle where it stops growing… The availability of iPads and smartphones is allowing corporations to trade down and eliminate the thousand dollars per year of supporting a Windows desktop. And this is the year where Windows has fallen below 50% of internet connected device down from 97% a few years ago.
Despite this, Mr. McNamee would still buy Microsoft (MSFT) because of the company’s strong position in an email.
When you’re a monopolist in an important category — and they are for sure a monopolist relative to email with Exchange — they’re going to be able to crank prices on Exchange. I actually think Microsoft is a buy.
Mr. McNamee is a smart guy who took an early huge stake in Facebook for Elevation Partners. However, the Business Insider thinks that Exchange as a replacement for the Microsoft Windows business is bizarre for a bunch of reasons:
- Market share. Exchange Server has the majority market share — most estimates put it above 70% and higher in larger enterprises. But it doesn’t have the 90%+ share that Microsoft has enjoyed with Windows for the last 20-plus years.
- Sales. Windows had about $18 billion in sales last year. The last time Microsoft revealed Exchange numbers was FY’07 when it had sales of $1.5 billion projecting forward, Exchange would have had $2.8 billion in sales in FY’10.
- Margins. Windows has one of the greatest operating margins of any legal business in history – up to 80%. Exchange sells in lower volumes, faces more competition, and requires longer and more personalized sales cycles, which almost certainly means it’s got lower margins.
- Competition. Older messaging systems like Lotus are slowly dying, but Exchange faces serious price pressure from Web-based email providers, particularly Google’s Gmail. Microsoft has responded with Exchange Online, its own hosted service, but it’s already had to lower prices on the service once.
- Strategy. Windows pulls through sales of Office and other desktop software, which in turn pulls through sales of business servers (including Exchange). Its ubiquity helps Microsoft sell Windows Server and other enterprise software. Its huge margins allow Microsoft to pour money into projects like search and Xbox, which pressure the competition.
- If Windows dies, Microsoft will have to do a lot more than monopolize email to replace it.
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But Mr. Gates Sir, If I could just get my hands on Jobs, I’d…
Microsoft has had a long struggle to get Windows XP out of the enterprise, and with PC sales dipping the MSFT recovery will be harder thanks to the rise of the iPad. I would rather put my money on the Ballmer Boys to stage a spectacular comeback with Windows Phone Windows 8 than to turn Exchange into a cash cow like Windows.
What do you think?
Will Microsoft be able to continue its hold on the corporate desktop?
Can Exchange become the next great money-maker for MSFT?
Related articles
- The Bubblies Are Flowing At Microsoft As Windows 7 Bypasses Windows XP (lockergnome.com)
Ralph Bach has been in IT long enough to know better and has blogged from his Bach Seat about IT, careers, and anything else that catches his attention since 2005. You can follow him on LinkedIn, Facebook, and Twitter. Email the Bach Seat here.
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