IP: Microsoft to maximize revenue (will wonders never cease?)

[David Farber <dave () farber net>]

[ Does sound reminisent of the old IBM lease only arrangements that make a 
great cash flow generator till the anti-trust suits against IBM djf]


> From: "Janos Gereben" <janos451 () earthlink net>
> To: "jg" <janos451 () earthlink net>
>
> Microsoft to announce license strategy shift
> Simon Robinson - www.the451.com
>
> London - Microsoft confirmed that it will announce changes to its
> licensing structure for companies that buy its software in large
> volumes. The software giant is expected to end its current
> "perpetual" method of licensing software for enterprises in favor
> of a system that guarantees it revenue growth in the mature PC
> market.
>
> A Microsoft spokesperson said the company was planning to make a
> licensing-related announcement Thursday, but declined to provide
> any further details. However, the spokesperson confirmed the
> announcement was in line with reports from analysts this week that
> said Microsoft was planning to end or reduce its current perpetual
> licensing model. UBS Warburg analyst Don Young said in a research
> note Monday that the change was a "fundamental shift" in
> Microsoft's financial model, which "enhances both their growth
> outlook and the stability of their revenue and earnings stream."
>
> Microsoft currently sells its most popular software, such as the
> Windows operating system and Office applications suite, to large
> companies through an Enterprise Agreement scheme. Under this,
> companies pay a set amount per user for a prescribed contract
> period. Once this period has expired, companies can carry on using
> the software free of charge. Microsoft is understood to be
> changing this so that when the contract expires, companies must
> either sign (and pay for) a new Enterprise Agreement, sign up to a
> different license program (such as Select or Open), or discontinue
> using Microsoft's software.
>
> Microsoft has good cause to introduce these changes, though it
> remains to be seen how these changes rub with customers, who have
> the most to lose from the changes. The main driver for change is
> the slowdown in the global PC business, which obviously directly
> affects the amount of software Microsoft sells. Microsoft needs to
> protect itself against this slowdown, and it is doing so by
> maintaining revenue growth through its existing (and mature)
> business. Large companies aren't replacing their PC
> infrastructures at the rate they once were, and not all of them
> see the need to upgrade to Microsoft's latest applications suite
> or operating system, which together account for over 65% of
> Microsoft's revenue.
>
> This approach also fits in with Microsoft's topline strategy to
> sell software as a service. If licenses are non-perpetual, this
> effectively means that enterprise customers never actually own the
> license. Combined with plans to develop its bCentral portal as a
> host site for all small business applications, Microsoft could
> then say that it has a predictable revenue model for all
> commercial users.
>
> UBS Warburg analyst Young also added that if Microsoft abandons
> perpetual licensing for its Enterprise Agreement customers, then
> it may also do the same for other license schemes, such as the
> Open or Select site license programs, which are typically used by
> small and medium sized companies and account for the bulk of
> Microsoft's end user sales. "We believe Microsoft's strategy to
> shift more and more commercial customers to Enterprise Agreements
> would be undermined if site licenses were perpetual and Enterprise
> Agreements were non-perpetual," said Young.
>
> ================
> Janos Gereben/SF, CA
> janos451 () earthlink net



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