Microsoft’s Emerging Market Problems: Piracy & Naked PCs (Reuters)

Despite the popularity of the Microsoft Corporation (NASDAQ:MSFT) Windows operating system and Office suite, few people in emerging markets are willing to pay for legitimate copies according to a lengthy Reuters article. In fact, analysts say even buyers of pirate software prefer older versions of Windows rather than Windows 8; but Ben Thompson, the Taiwan-based author of stratechery.com, a popular technology blog, had this to say:

“The great danger for the company is that what has happened to them in emerging markets – basically no revenue from new PCs because of piracy – is not far off what’s happening everywhere.”

The stakes are high because according to the BSA anti-piracy lobby group that Microsoft co-founded, emerging markets account for 56% of all PCs in use and 73% of software piracy. Moreover and of the $77.8 billion revenue Microsoft generated in its 2013 financial year, China, Brazil and Russia each “exceeded” $1 billion.

Aside from piracy, its worth noting that up to 60% of PCs shipped in the emerging markets of Asia are so-called “naked PCs” with no Windows operating system pre-installed as they usually carry some sort of free and open source operating system like Linux. That compares with about 25% in the region’s developed markets like Japan and Australia.

The operating system is one of the costliest parts of the machine for PC makers working on wafer-thin margins while mom-and-pop shops which form the bulk of retailers emerging markets can’t afford to turn away price-sensitive customers who are comfortable buying pirate software.

To read the whole article, ‘Naked PCs’ lay bare Microsoft’s emerging markets problem, on the website of Reuters.

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