Microsoft is being seriously spanked by people buying naked PCs and installing pirated versions of its operating system, particularly in China.
Vole said that too few people in emerging markets are willing to pay for legitimate copies and this is holding back the spread of its newest Windows 8 version.
Ironically analysts say even buyers of pirate software prefer older versions and more than 90 percent of PCs in China, are running pre-8 versions of Windows.
Microsoft is trying to tackle the problem by offering Windows 8 at a discount to PC manufacturers who install its Bing search engine as the default. And it’s giving away versions of Windows 8 for phones and some tablets.
However Reuters thinks that masks the fact that Redmond never really worked out how to get people in emerging markets to pay for its software.
In 2011, then CEO Steve Ballmer told employees that, because of piracy, Microsoft earned less revenue in China than in the Netherlands even though China bought as many computers as the United States.
This hurts Microsoft because 56 percent of its global revenue and 78 percent of operating profit came from Windows and Office.
In China PC makers working on wafer-thin margins see the operating system is one of the costliest parts of the machine.
The result is that up to 60 percent of PCs shipped in the emerging markets of Asia, have no Windows operating system pre-installed and carry some free, open source operating system like Linux. However once the owners get them home they just download a hot copy of Windows and Office.
Some Chinese retailers even offer “bundles” of pirated copies of Microsoft software alongside the main sale.
Microsoft has had a job getting respected firms like Lenovo to stop shipping naked PCs, but the Chinese firm countered that its margins were too low. China announced a new law requiring PCs to be shipped with operating systems. That merely dented piracy rates, which fell to 79 percent in 2009 from 92 percent in 2004.
Lenovo has reached an agreement with Microsoft in June to ensure that Lenovo PCs sold in China would come pre-installed with a genuine Windows operating system.
The way Microsoft has done this is to push the price of Windows low enough to make it worth a PC maker’s while. The cost of a Windows license has fallen to below $50 from as high as $150. So far it is not clear if that has worked.
