Saturday, February 13, 2010

Microsoft Pirates

I had a fellow investor tell me one day that they would never buy shares in Microsoft as their software is so widely pirated. I'm not a big fan of Microsoft stock but I've heard that reason given before and it is just silly- let me tell you how it works.

Microsoft widely subsidizes licensing for high schools, universities and colleges. They also provide university bookstores with deeply discounted licenses for their products to sell to students. This puts the product front and center and forces students to learn it or face failing their courses. After four or more years working with the product students in all ranges of study become proficient users. This indoctrinates users into Windows' users. The cost of retraining these people would be tremendous, so the net effect is that it forces future employers to buy Microsoft products.

If you somehow manage to elude Microsoft products through your education then you may end up pirating their software for your home use. Microsoft has a well known anti-piracy group but the reality is that they really don't care as much about single user license violations (they care, just not as much). The focus on piracy is aimed steadily at the big perpetrators of piracy, people who are profiting by selling pirated Microsoft products, or corporations that have multiple license violations. Microsoft doesn't care that much about your 13yr old son with a pirated copy of Microsoft Visio for the same reason that many tool companies give away free tools to recent trade school grads. Once you get use to our tools, why would you want to throw all of them out and relearn a whole new set when it comes time to upgrade or amend your set?

There is another reason why piracy actually fits into the profit model of a business. Buzz. It is well known that retailers often provide products to celebrities. Other companies such as Nike have admitting allowing the theft of their products in sample markets. This is an extremely inexpensive marketing and focus group activity. By getting the product out in front of customers, even if you have to give it away, they are very likely to rejoin the paying fold in the future or encourage others to.

Indoctrination isn't free, but it sure does pay in the long run. If you want to dislike Microsoft stock that is ok, but dislike it for the right reasons.

This article was written by buyingvalue. If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.


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