Microsoft’s Great Windows 7 Growth Lie
April 26th, 2010
Daniel Eran Dilger
Windows Enthusiasts, the insulating layer of blubber on Microsoft’s monopoly whale, are excited to see Microsoft’s Q3 Windows unit licensing and profits growing faster year over year than Apple’s new Mac shipments. They think Windows 7 is winning. But they’re wrong, here’s why.
This latest bit of misinformation comes, unsurprising, via Paul Thurrott, who repeated ignorant statistics from Tod Bishop comparing Microsoft’s Q3 2010 licensing growth year over year with Apple’s Q2 2010 hardware sales growth. (Microsoft’s fiscal Q3 and Apple’s Q2 both represent the same Jan-Mar quarter.)
The numbers: Microsoft’s Windows licensing grew 35%, while Apple’s Mac sales only grew by 33%. The problem with this simpleton buffoonery is that these numbers are wildly taken out of context. They are a statistical lie being played by disingenuous misinformation dealers in order to insist that up is down and black is white.
Real Growth vs. Partial Recovery
Apple’s growth in hardware sales has been progressively advancing by around 34-51% or more each quarter for several years. Compared to the growth in PC sales across the industry, Apple has consistently maintained about 3 to 4 times more real growth than generic PC makers overall. This was even the case in 2009, when PC sales imploded and there was actually “negative growth” industry wide; despite a global market contraction of 10.9%, Apple only saw a 3% decline in growth for its systems running Mac OS X.
Apple’s expansion has come directly from the hide of Microsoft’s monopoly, because there was nowhere else it could have come from. Apple wasn’t expanding the Mac market in some uncharted new direction, it was simply getting Windows PC users to switch in droves. Knowing as we do that Apple has been outpacing the PC industry in terms of the growth for several years now, how is it that Windows Enthusiasts have conjured up percentages that suggest the exact opposite is now occurring? By lying of course.
But that’s not all. According to these schmucks, it’s not just a case of Microsoft growing faster. It’s also a case of (wait for it…) bigger market share. “Microsoft is growing from a significantly larger base of sales to begin with, making its higher growth rate considerably harder to achieve,” crows the idiot Bishop, saying something so profoundly stupid that Thurrott had to repeat it to his own audience of morons with some extra exaggerations.
“The truth is that consumers buy PCs, not Macs,” Thurrott explained to his audience without even needing a blackboard to draw upon. “And that’s as true in the US as it is elsewhere in the world.”
Hitting Them Where It Hurts: Windows Consumer Growth Rate Outperforms Macs – SuperSite Blog
Except that Microsoft didn’t grow its market share by 33%, obviously. It experienced a quarter of year over year growth in Windows licensing revenues (up 28%) and profits (up 35%). But unlike Apple, this wasn’t the continuation of steady growth over a period of years. Instead, the “growth” that Microsoft experienced was a year over year fluke based on a partial recovery after hitting a deep trough last year.
In reality, Microsoft’s Q3 2010 profits from Windows were up 35% over its Q3 2009 figures only because Q3 2009 had plunged to $2,273 million, making this year’s Q3 income of $3,061 million seem like growth when in reality, it was still lower than Microsoft had reported in Q3 2008 (when the company earned $3.1 billion) and significantly down from 2007 (when it earned $4.2 billion).
Rather than really growing its market, as Apple has done in growing from 1.5 million Macs in Q2 2007 to 2.9 million in Q2 2010, Microsoft’s Windows licensing has dropped significantly, both in revenues and profits, across the same time period. This doesn’t mean Windows 7 is overtaking Mac sales. It means Apple is now twice as big in terms of unit sales while Microsoft is making a billion and change less from selling Windows licenses than it did in the same three year period.
To add some more context to these numbers, Microsoft shipped Vista at the end of 2006, making the Q3 2007 numbers an early launch that stuffed the channel with Vista. In 2008 and 2009, Microsoft was unable to sell Windows Vista licenses, with revenues dropping by nearly a billion per year and profits collapsing nearly in half. Windows 7 shipped at the end of 2009, meaning the “growth” over 2009 is just Microsoft stuffing the channel with new launch licensing. Even so, the Windows 7 launch quarter was nearly a billion short of Vista’s awful launch three years earlier.
Microsoft Reports Third-Quarter Results (2009 and 2010)
Microsoft Reports Third-Quarter Results (2007 and 2008)
A Huge Lie for Windows Enthusiasts
This isn’t hidden information, it’s in Microsoft’s SEC filings and PR reports. Windows Enthusiasts know that the company’s Windows licensing revenues and profits hit rock bottom as Vista’s failed launch was exacerbated by a global meltdown in PC sales during the Great Recession. Things haven’t recovered much (and simply can’t) because Microsoft is now selling a much larger proportion of low cost Windows licenses to a huge influx of cheap netbooks rather than selling more expensive Vista/7 “Premium” and “Ultimate” licenses to high end PC users, as the company had hoped to do.
Even as the PC market refuses to grow as dramatically as it once did, the overall market’s ability to sell expensive Windows licensing is collapsing because the cheapskates looking for a knockoff deal are ending up with $300 netbooks rather than $700 PCs. That’s leaving the entire premium PC market to Apple.
And that’s where the real growth Apple is seeing–consistently year over year, and not just in a recovery blip hailed as “growth” by disingenuous liars–is happening. Apple is selling higher end, sustainable profitable hardware. Apple’s margins are much lower than Microsoft’s because the company is selling a real product, not just licensing software as a tax on PC makers.
Windows 7 is Not Beating the Mac Back Into Obscurity
When liars like Thurrott and Bishop publish information they have to know is not accurate, they’re doing more than just lying. They’re hoodwinking their audiences, Glenn Beck style, into thinking things are up when they are actually down. And they’re creating a cult following that loves to hear more lies.
Both Bishop and Thurrott also use extremist scapegoating language to vilify “them” while they position this false trend as “evidence” that Apple’s success is a sham and that real soon now, the people at Gartner who are responsible for crafting statistics to flatter Microsoft will rejigger their market share numbers to reflect the fact that Microsoft’s partial recovery in selling Windows licenses somehow means that Windows 7 is winning back people who have switched to the Mac platform.
Never mind that Gartner has already done its very best to craft false market share numbers that make Microsoft’s share look much better than it really is. The firm has gerrymandered its definition of the “PC market” to represent, not PCs sold to a specific type of users, but simply systems that are capable of running Windows.
Like IDG, Gartner includes Windows PC servers (but not a vast number of servers designed and sold to run alternative operating systems!) in with the “PC market,” and then also includes a huge new pile of netbook devices that don’t really do what PCs do (while excluding other handheld mobile computers such as the iPod touch). This balloons Microsoft’s fancifully contrived market share of worthless categories of sales while covering up the very real and valuable gains Apple is making.
Were ICD/Gartner to define “PCs” as a market that represented an actual market, rather than just a bunch of unrelated machines that are all capable of running (and destined to ship with) Microsoft’s operating systems, then it would become reported fact that Apple is eating up major market share in the premium PC market and the mobile devices market, two of the fastest growing and most profitable segments within the sham “devices that run Windows market” that IDG and Gartner have long misrepresented in their desperate efforts to cover up the fact that change is afoot and Microsoft’s empire is crumbling.
Such reality-based facts would be toxic to Windows Enthusiasts like Thurrott and Bishop, who would have to more furiously spin even more outrageous outright lies in order to deny what is happening.