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Weblog:   Microsoft Mac FUD, Phooey!
Subject:   Is MS greedy? Check my math...
Date:   2002-07-19 15:01:27
From:   odellj_wi
I haven't seen anyone else talk about the numbers. What does 300,000 copies of Office v.X translate into in real money? Assume all the copies are upgrades (which they weren't, but this is a worst case scenario) ($275/copy). Assume they were sold at a 100% retail markup, and MS gets 50% of that (again, a worst case scenario).
$275*0.5*300,000 = $41,250,000. Keep in mind Office came out in October, 2001. That means 10 months ago. Is it reasonable to assume that it would take that long to break even (again as a worst case scenario)?


Let's figure out what that revenue translates into in programmer's time. Assume everybody associated with the project a)worked on it full-time b)was compensated at $100,000 (again, an over-estimate, because packaging people, interns, programmers with few years of experience, and maybe QA people never see that kind of money) c)devoted 3 years to Carbonizing the code they had already written (I really doubt it took that long, but I am not a programmer). Take the $41 million above and divide by $300,000 and you come up with 137.5 programmers. So, now tell me, are they breaking the bank programming Office v.X, or is Office just not the profit center they anticipated to use to fund their .Net Borg collective?
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  • Tim O'Reilly photo Is MS greedy? Check my math...
    2002-07-22 19:16:31  Tim O'Reilly | O'Reilly AuthorO'Reilly Blogger [View]

    I have heard that the Office X Mac team is 12 programmers. Of course, there are lots of other people besides developers who are involved in the development and marketing of a product. And salaries are not the only costs for personnel. Still, it's clear that this product would be a success by any one else's standards. Of course, Microsoft *does* have higher standards for profitability. If I recall from a few years ago, the Software Publishers Association published figures showing that the average revenue per employee at small software developers was somewhere around $130,000/year, while at the big guys like Microsoft and Oracle, it was $600,000/year (or so.) I don't know what proportion the developer team is to other MS employees, but it's certainly possible that the Mac software unit is less profitable than other parts of Microsoft. This doesn't have to be "greed" -- it can be a realistic assessment of "opportunity cost." But of course, it's still early in the OS X market, and I believe that the opportunity is huge.
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