Microsoft has made too much money for too long. A deal with Best Buy seems to be the latest sign it has to give some back.
To make its huge profits, Microsoft has long relied on help from others. The likes of Dell and Hewlett-Packard build boxes that are, in essence, delivery vehicles for the lucrative Windows operating system and Office productivity software—not to mention pricey Intel chips. The PC makers eked out single-digit profit margins and made it up in volume.
On the distribution end, there have been stores like Best Buy, which padded its bottom line selling warranties attached to electronics, as well as all manner of accessories and even DVDs. But Best Buy is suffering as customers use its stores as showrooms, only to buy products later on Amazon.com. Meanwhile, PC makers have been hit as tablets gobble up spending on PCs.
Consequently, Microsoft has been forced to chip in to help others deliver its software. It is discounting Windows so PC makers can create lower-price devices. It is subsidizing Nokia’s development of Windows-based smartphones.
To compete with the impressive distribution and service Apple provides via its retail stores, Microsoft last week struck a deal to create “Windows Stores” at half of Best Buy’s U.S. locations and more in Canada. Terms of the arrangement weren’t disclosed, but it is doubtful Best Buy is remodeling stores and adding staff without financial help.
Samsung is chipping in, too. It is rolling out stores within all of Best Buy’s locations, and paying for its own staff on site.
Like Microsoft, Samsung can’t hope to keep making tidy profits without a little help down the line. Credit is due to Best Buy for thinking outside the Big Box to take advantage of the shift.
–Rolfe Winkler
Write to Rolfe Winkler at [email protected]
To make its huge profits, Microsoft has long relied on help from others. The likes of Dell and Hewlett-Packard build boxes that are, in essence, delivery vehicles for the lucrative Windows operating system and Office productivity software—not to mention pricey Intel chips. The PC makers eked out single-digit profit margins and made it up in volume.
On the distribution end, there have been stores like Best Buy, which padded its bottom line selling warranties attached to electronics, as well as all manner of accessories and even DVDs. But Best Buy is suffering as customers use its stores as showrooms, only to buy products later on Amazon.com. Meanwhile, PC makers have been hit as tablets gobble up spending on PCs.
Consequently, Microsoft has been forced to chip in to help others deliver its software. It is discounting Windows so PC makers can create lower-price devices. It is subsidizing Nokia’s development of Windows-based smartphones.
To compete with the impressive distribution and service Apple provides via its retail stores, Microsoft last week struck a deal to create “Windows Stores” at half of Best Buy’s U.S. locations and more in Canada. Terms of the arrangement weren’t disclosed, but it is doubtful Best Buy is remodeling stores and adding staff without financial help.
Samsung is chipping in, too. It is rolling out stores within all of Best Buy’s locations, and paying for its own staff on site.
Like Microsoft, Samsung can’t hope to keep making tidy profits without a little help down the line. Credit is due to Best Buy for thinking outside the Big Box to take advantage of the shift.
–Rolfe Winkler
Write to Rolfe Winkler at [email protected]