OS, Enterprise Licenses and Upgrades Heavily Discounted

Usually careful and selective with its promotional discounts, Microsoft is discounting almost all of its major products, through all of its volume discount plans, as it approaches the end of its 2009 fiscal year. The company is also waiving a fundamental rule of Software Assurance (SA) in an effort to encourage customers to buy Windows 7 upgrade rights in advance of that product’s release. The changes offer customers some significant benefits and could signal longer-term price reductions or rule changes. However, they also pose some risks to Microsoft and its resellers over the next two to three years.

Recessionary Impact

Changes in the technology landscape, combined with a worldwide recession, have already had an impact on Microsoft. The company is traditionally known for high profit margins on products that dominate their markets, which have often insulated the company from the worst effects of market declines.

The company continues to be profitable, but a downturn during the second quarter of its fiscal year, which ended Dec. 31, 2008, caused it to miss its forecasts for only the second time in its history. In the face of what CEO Steve Ballmer calls a “once-in-a-lifetime set of economic conditions,” combined with a challenge to all-important OS revenues from low-end netbook computers, the company has stopped issuing guidance, laid off employees, and discounted prices more deeply and broadly than ever in its history.