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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