Microsoft, First They Screw Vendor Partners, Now They Take On Retail Partners As Their PC Sales Get Smashed
David Richards
25 Apr 2015
On one hand Microsoft is cuddling up to partners such as Lenovo, Acer, Asus and HP in Australia an effort to get them to sell more Microsoft Windows licences then with the other hand they are stabbing them in the back by rolling out Microsoft branded Surface tablets in an effort to strip hardare sales away from their Windows partners.
Now the big software Company who is struggling in the consumer gaming console market and the PC market is set to open a Sydney store that will compete up against their retail partners such as Harvey Norman, Dick Smith and JB Hi Fi.
In the last quarter Microsoft computing and gaming division saw revenue sank 8.8 per cent from the same quarter a year-ago to $1.8bn as the Company struggled to convince consumers to buy a Windows based smartphone Xbox gaming console or their Surface tablet.
This is despite Microsoft Australia splashing out millions in retail incentives and merchandising including direct payments to store staff for selling a Microsoft branded PC product.
During the past year Microsoft consumer sales have slumped 9%.
This week Microsoft Australia was out generating Microsoft publicity for itself when they has announced that it will be opening its first flagship store outside of North America, in Sydney.
Pip Marlow the CEO of Microsoft Australia has not said how PC sales are going in Australia. Retailers who ChannelNews has spoken to have said that they are not happy with Microsoft’s decision to openly compete against them for sales.
The new two level store will be located at Westfield Sydney on Pitt Street Mall close to Dick Smith and JB Hi Fi Stores.
The store will sell the same range of Microsoft products, including Windows PCs, Surface devices, Windows Phones, Xbox One consoles, and Office software that their retail partners in Australia are trying to sell for the big software Company.
At this stage no opening date has been set, the store is expected to open in time for the Christmas rush.
Microsoft, along with Apple and Google, recently admitted during a Senate inquiry into tax avoidance that it is being audited by the Australian Taxation Office.
Microsoft’s overall revenue of $21.73bn for the quarter met analysts’ expectations, but growth still eludes the software giant especially when it comes to selling goods to consumers who are deserting Microsoft for products from their partners including Apple and Google.
Even large enterprise customers are dumping Microsoft software and hardware, Woolworths now uses Google software with staff being given Acer made Chrome OS Chromebooks.
Last quarter, its sales were up 8 per cent, year-on-year. This quarter it saw only 6.5 per cent growth.
Overall net income for the quarter was $4.99bn, down 11.9 per cent from the year-ago quarter.
Microsoft Devices and Consumer Licensing division which covers sales of software like Windows and Office to the retail market – reported revenue of $3.48bn, a 20.7 per cent decline from a year ago.
Similarly, the enterprise-focused Commercial Licensing group brought in $10.04bn in revenue – which, while impressive, was still a 2.8 per cent year-on-year decline.
Things weren’t looking so great in the mobile market either, while the group brought in $1.4bn in revenue in the first quarter and said it sold 8.6 million Lumia devices, it lost $4m in gross margin.
Surface revenue for the quarter was $733m.
The only bright side for Microsoft was their Office 365 Home and Office 365 Personal subscriptions service which, saw year-on-year growth of 16.9 per cent, with revenue of $2.28bn for the quarter.
This year Microsoft is looking to give Microsoft 10 licenses away for free for 12 months in another move that will strip revenue away from retails, then after 12 months they will charge millions of users who have signed up for the free version a fee to carry on using the already installed software. The revenues will go direct to Microsoft and not the retailers who have sold a PC with the free Windows 10 software loaded in the first place.
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