Looking at the trends for the past year, Microsoft Windows is slowing losing market share for operating systems. Virtually all this loss is attributable to Apple's gain through the Mac O.S. Linux is steady and just not making any headway at all. With the battle lost on the netbook front to Microsoft Windows, Linux will continue to languish.

Ridley,
That "trend" as you call it, comes from Net Apps, which has the vast majority of its tracking sites in the USA, so you are getting a highly inaccurate distorted "trend" with no basis in reality. Even Ballmer said the main competition was with Linux.

Joe:
The title of your article is "Netbooks Are a Menace." Yes, they are a "menace" to the bottom line of Microsoft. On the other hand, they are great for consumers, you know everyday people who have to buy computers. Maybe that is where eweek should focus more on, the consumers, everyday folk, and not be so concerned with Microsoft making the very last dollar from people.

@Ridley

You forget that netbook sales in Europe are 8X the rate in the US and we are not afraid of Linux here. Overall sales for netbooks worldwide are 40% Linux and 60% Windows XP.

The Linux numbers impress.

Re: The title "Netbooks Are a Menace"

WTF???? The analysis is interesting, but the title is just plain STUPID...

Why not just say that PCs are a menace to mainframe profit margins. Diesel-electric locomotives are a menace to steam engine profit margins. The web is a menace to newspaper profit margins. Paper is a menace to clay tablet profit margins. Doctors are a menace to funeral home profit margins.

A headline like that suggests that you should pack it up and move to Amish country, the wilds of Alaska, or the Australian outback. Then you won't be offended by progress, competition (except for you against nature), and the resulting lower costs that they bring to the world.

The numbers are worldwide numbers. You can check them. Linux has gone nowhere for at least the last 10 years, and if it survives, will still be at the same adoption rate in another 10 years. And the Linux numbers absolutley do not impress. That 40% is 40% and rapidly decreasing.

I think this is why all of these market share analyses are worthless.

Yesterday Joe highlighted (in an Apple Watch post) the fact that "the iPhone is an ant to Nokia, the 2008 market share of which was 38.6 percent." His premise was that Nokia was doing better than Apple because it had larger market share.

After that post, Nokia reported earnings which showed a 90% drop in profit, in part due to their pursuit of market share.

The market share game is for fools.

Joe says:
"The eWEEK story offers additional data points and recommendations for what Microsoft">Microsoft and its partners must do to fix the problem. Netbooks are a menace"
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Not quite gone are the days of the record Micro$oft profits from Windows and Office, its two cash cows. But I think this article is showing that those days are fewer fewer. This is a major world wide recession, maybe even a depression, people do not have the money they did on average 6 months ago. So OEM's and M$ will have to be content with less profits, and scheming off ways to rip off the people is not going so well this time.

Netbooks are going hurt M$ long term. Netbooks are going cause all computer prices to decline as well. M$ at some point (already is on netbooks with XP Home) will have to greatly reduce the price on Windows, or lose market share even faster than it is now.

@Joe Wilcox:
One major question for you, the figures you gave about laptop price averages coming down, did that include the prices of netbooks adding in? If so, then the price of Laptop really did not come down, did it?

http://www.forbes.com/2007/02/10/microsoft-vista-drm-tech-security-cz_bs_0212vista.html

@Ridley

I am afraid with Ubuntu the world is catching on. No more Microsoft tax.

Long term the prospects for Microsoft look terrible.

Joe,
In your other article, which is sort of a companion piece to this one: "Netbooks-Are-Destroying-the-Laptop"

Quoting from that article:

"Microsoft has already embarked on an aggressive and surprisingly successful marketing campaign: "Laptop Hunters." Contrary to the fierce Mac-PC fanboy blog and Twitter debates about pricing, the commercials are about value. In two of the three commercials, shoppers have budgets of $1,500, or nearly $1,000 more the what the average notebook sells for. NPD categorizes PCs selling for above $1,000 as "premium." At U.S. retail, Apple, with its vastly higher ASPs, has about 80 percent marketshare in the premium segment.

The "Laptop Hunters" commercials are designed to reach buyers with big budgets in a declining economy. Microsoft is taking on Apple in its core market segment: consumers willing to spend $1,000 or more on a new computer. It's a segment where more OEMs need go, particularly with pricing and margin damage being inflicted by netbooks."
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Apple has 80% markershare in over $1000 laptops? This is an astounding figure. Back about 6 months ago, it was 66%. So has Apple actually increased its penetration of the high in laptop market, as this suggusts? Also, the figures you quote, must be for the USA only? As Apple sales are not many in most overseas countries.

Still, at this percentage, many OEM's must be thinking of abandoning that part of the market? The problem is that Vista does not complete well with most other operating systems. Linux and Mac do compete well with Vista. DRM is at the heart of Vista/Seven's problems.

Vista’s DRM mistake, and the decline of Microsoft Windows

http://www.thomaspurves.com/2007/02/20/vistas-drm-mistake-and-the-decline-of-microsoft-windows/

Menace? Only to Microsoft's desktop monopoly. Nothing last forever and Microsoft's days of domination are coming to a close.

Monopolies don't shrink, they collapse. With lower margins and a tarnished brand the 800 lb Gorilla will be on its knees by the end of this calendar year.

@Joe Wilcox:
Sorry, I have to follow up on this, as I am just getting what you have been saying. This from my previous post:

"Apple has 80% markershare in over $1000 laptops? This is an astounding figure. Back about 6 months ago, it was 66%. So has Apple actually increased its penetration of the high in laptop market, as this suggusts?"

If Apple increased it penetration in the $1000 and up laptop market (USA only?) while it lost overall sales, what does this say about the OEM sales on the over $1000 notebooks sales? what I deduce here from this, is that OEM sales of the over $1000 laptop market sales, fell at a much faster rate than Apple did. Which is why the M$ adds. Those adds will not work, but they might make users buy cheaper laptops instead. Those adds will not save the over $1000 bracket.

HD Monitor Causes DRM Issues with Netflix

http://yro.slashdot.org/article.pl?sid=08/01/03/2339248

The current cost reduction trend is likely to lead to an expansion of low cost computing on completely new devices. How about photo frame computers? Refrigerator computers? TV computers?

The companies making the chips should make tons of money in the shift. If "thin" OSes like Android become dominant, the OS guys won't make as much money, but the app developers could potentially have billions of customers for their apps.

It's not that money is being lost. It's that it is being distributed in a different way.

Serious question Joe: Do you know anyone at NPD? I know they measure retail, but their figures seem to bear no relation whatsoever to IDC and Gartner.

"At U.S. retail, Windows PC sales were way up in both January and February but way down for Macs, according to NPD. Respectively, in February: plus 15.3 percent and minus 16.7 percent"

Chips, continue the wishful thinking, its making the market for Windows expand more and more. I can't believe that people actually say that Linux is doing well when it only has 3% market share among Netbooks.

Ok, so this 80% figure of Apple selling laptops over $1000 is the USA figure. Still, that is huge, think of the pain the OEM's must be going through. The question has to be asked, are some of the OEM's in danger of failing? This is the market where they made most of there profits, and Apple is killing them here. Not to mention, its also the market that M$ would be selling its "ultimate" bloatware in too.

On top of that M$ is forced to give away XP on netbooks to keep Linux at bay in the US market. And then there is ARM coming, it doesn't look good for the future of M$. M$ stock rating is not, sell, its dump.

A Cost Analysis of Windows Vista Content Protection

http://www.cs.auckland.ac.nz/~pgut001/pubs/vista_cost.html

Sounds like a bad case of Vista DRM failure to me.

The idea of putting Windows 7 Starter Edition on netbooks is looking more and more like an utterly stupid idea, don't you think? Microsoft's desperate attempt to shore up its profit margins will only drive more people to Linux.

The trend will computer. DVD players that cost $40.00 have almost as much computer in them as a netbook. Won't be long before we see many netbooks under $100. A Wii game machine is probably a better computer than most netbooks, so why don't netbooks cost less?
Is going to be very hard on MS, won't be able to make nearly as much money per PC sale. Very few of these ever get Office installed.
But really good for consumers and business's. Won't be long before corporation start to refuse to pay more than $500 for a computer.

@smist08 & Lawrence D'Oliveiro :
you two make a lot of sense as usual. I would add, that M$ is in more trouble here then what it looks like on the surface. Consider than by Net Apps stats, that about 3 years ago Windows had a 95.3% of the desktop OS market, and now its at 88%. A loss of 7% in the USA market. The linux stats from Net Apps are worthless, as Net Apps is paid by M$ and Apple, and almost all of there data collecting sites are in the USA. So worldwide, this data is most likely a lot worse for M$.

Now the 7% loss is one thing, but now we see the profit margin of M$ going down last quarter. We see M$ and the OEM's losing their best high profit base in the mature market USA, on Laptops over $1000. If fact, even though Apple sold less computers, the OEM's with M$ on them, crashed compared to Apple on Laptops over $1000 in the USA. At some point I would expect to see a M$ OS based on advertising alone, in order to make any money for them. When the ARM comes out, it will be very interesting, indeed. The recession will further the race to the bottom, and M$ cannot compete with free for very long there. Mac has already won at the top. M$ is now sort of at a tipping point, and will be on a slightly accelerated downward spiral, profit wise. Could this be the beginning of the end for M$?
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Help get the word out that Windows 7 is no different from Vista in the ways that matter

http://badvista.fsf.org/

I wander why you can not see Netbook as saver, rather than menace. If there are no Netbooks, the industry will be worse than now.
I have two Netbooks, as they looks interesting and handy. I prefer to ues Linux on themk, but unfortunately we can purchase only XP model here in Japan. So, I'm forced to buy unwanted MS Windows.
I strongly expect Windows-free Netbooks in the future.
It seems clear that you are looking this phenomena from vendar side, and I'm in the user side.
The purchase is off course "user". So, what ever you struggle, we will act as not to pay you unwanted money, and wellcomes "market breaker".

I read your article at eWeek. Are you suggesting that the industry should adopt some kind of price fixing, lead by Microsoft?

Price fixing is an agreement intended to ultimately push the price of a product as high as possible, leading to profits for all the sellers. The principal feature is any agreement on price, whether expressed or implied.

Sellers might agree to sell at a common target price; set a common "minimum" price; buy the product from a supplier (Microsoft) at a specified "maximum" price; limit discounts; discontinue a free service or fix the price of one component of an overall service; adhere uniformly to previously-announced prices and terms of sale; establish uniform costs and markups; etc.

Microsoft didn't have enough problem with antitrust laws?

@Joe

Don't worry about the manufacturers.

At $15 for Freescale's ARM chip in quantity, manufacturers can enjoy real profits rather than the usual thin PC or netbook margins.

Let's do the math:

Windows7 ($60) + Atom ($60) = $120
Linux ($3) + ARM ($15) = $18

Thus, a manufacturer will pay $102 less by adopting Linux/ARM.

Even Apple can have huge profits with ARM:

OS X ($120) + ARM ($15) = $135

Avro says,
"I am afraid with Ubuntu the world is catching on. No more Microsoft tax.

Long term the prospects for Microsoft look terrible."

Ridley says,

"LOL! That IS a good one!"

@foo,

You raise some interesting questions with your posts.

Foo says: "Are you suggesting that the industry should adopt some kind of price fixing, lead by Microsoft?
Price fixing is an agreement intended to ultimately push the price of a product as high as possible, leading to profits for all the sellers."
----------------------------------------------------
Of course that is what Joe Wilcox is suggesting. But it will not work, for more than one reason.

First of all, the OEM's are not going trust each other to stop making Netbooks. Second, they would rather sell something with a small profit, than nothing at all. Third, ARM is coming soon, and it will challenge the OEM's as well as M$. Because if Intel/AMD/Via and the OEM's do not have cheap Netbooks out there to compete with ARM Netbooks, the Red Chinese will put them on the market without the help of OEMS and kill them. The makers of small DVD players, that are not the makers of laptops and netbooks, will be able to make ARM netbooks and sell them very cheaply, with Linux on them, even in the USA. It why the OEM must try to compete, or lose even more of the market.

M$ and Intel are already trying to do their best to stop ARM by not porting Windows to ARM. There is no Windows ARM port. And even if M$ decides to make one, it would not be based on Windows Seven which is too resource intensive to ever run on an ARM cpu. It would have to be based on XP, but then, the 3rd party apps would also have to be ported as well, this is not going happen. What M$ could try, if ARM becomes popular is its old Windows CE (mobile) platform which already works on ARM. The problem is, Windows CE/Mobile is just for Cell phone, and no real laptop apps or games for it. So its really not useful.

Debian Linux already has a fully mature distro that it has supported for years for the ARM, freely available. While there maybe others, Debian could be the one that most will use.

"Netbooks Are a Menace"

Yep bigger Menace than you dream. MS has had to cut there OS price to bone on them. Low laptop price Lower margins for OS makers.

Did Linux lose the war. Nop. Linux did not have to win. Linux has forced MS into fighting themselves. XP vs Windows 7. With a final problem Windows 7 will be only sellable for bugger all on netbooks.

You have also missed the real Menace trend. Netbooks are slowly growing in size so reducing the area of the laptop market.

Do you find it conceivable that Linux/ARM can reach 1/4 of the overall netbook market share by 2010?

Do you believe that Linux can reach (or keep?) 1/3 of the Intel netbook side by 2010?

If you answered "yes" to the two questions above, that means that you find it conceiveable that Linux can surpass Windows by 2010.

Let's do the math:

If Linux/ARM reaches 1/4 of the overall netbook market and Linux keeps 1/3 of the Intel market share, the scenario will be like this:

25% Linux / ARM
25% Linux / Intel (1/3 of Intel)
50% Windows / Intel (2/3 of Intel)

That's right: Linux == Windows in netbooks; and it doesn't have to surpass Windows on Intel.

@Ridley's response it typical. Microsoft can't kill Linux, it's main competitor, so they just pretend there isn't a threat.

Keep on believing that stuff about Linux, @Ridley. Please. And convince Ballmer too.

@maddog:

Thanks for the entertainment. LOL! You truly are funny! You are right however, Microsoft won't kill Linux. Users will kill Linux!

Linux is a kernel.

Linux death might come but it will not be from Users as such. Simple problem here Linux interface is common to all posix based OS's. If it improves to usable you will have solarias Freebsd and others you don't know competing for the same market.

The flood gates will open. Linux has very few applications that are platform Dependant on Linux.

It is all about the application, not the operating system. A good OS matters, but it isn't a spreadsheet, a wordprocessor nor a database for the average office guy or gal.

Why do you think Google has been so pervasive? They heeded this principle, plus marketing, plus providing avenues for all users regardless of price. You want it free, you got. You want more features and are willing to pay, you got. You want access to other like-minded app-providers, you got it.

If the non-Windows OS crowd came up with some killer apps, they would kill the competition.

So it goes for hardware as well. Portability, yes. Lower price, yes. Long, long battery-life (7 hours or more), yes.

Build a better product for the right market and you got a win-win. Diss the user, and you got a loss.

(past and current computers I have owned: commodore 64 luggable, commodore 64, amiga 500, amiga 1000, Mac emulater card on my Amiga 1000, Dell Optiplex GX240, EPC 1000HEB, and at least home-brew basic desktops)