12 hours ago, JoshRoss wrote
It's not like all that money is in some type of Scrooge McDuck room, where Bill Gates, Larry Page, Mark Zuckerberg, and the corpse of Steve Jobs spend their evenings swimming in a pool of currency. Most of these folks are actively seeking to throw their money at fools like us, who have started some company that might offer-- once acquired-- the slightest competitive advantage against one of their competitors.
Compared to most companies, they are Scrooge McDucks. These companies each enjoy operating margins in excess of 30%.
At the risk of appearing to channel Bass, compare Microsoft's 38% operating margins to RedHat's 18%. Consider that RedHat even has most of its development done by the open source community whereas Microsoft depends on its own salaried developers. We're not even considering the fact that Microsoft has to have way more overhead to manage so many divisions other than WinDiv as well as fund run non/un-profitable entities like Microsoft Research and the Online Division.
Another example is salesforce.com. They've been receiving all kinds of praise for supposedly eating Microsoft's lunch in the SaaS space, but they have a -2% operating margin. Yes, they spend MORE than they take in in revenues. They are money churners. You spend $1 on salesforce.com, and there's a far greater chance that you'll be getting part of the money back than if you spend that same $1 on Microsoft Dynamics CRM.
Every now and then Microsoft does "donate" money like when they purchased Danger and aQuantive, but those amounts are drops in the bucket compared to what Microsoft's competitors have to spend every single business day in order to compete with Microsoft.
So that I'm not sounding like I'm getting on only Microsoft's case, let's compare Apple's 35% operating margins to HP's and Dell's 5% operating margins. And if you want to compare them to a company that competes with Apple only in the smartphone space, consider that HTC's has a 15% operating margin.
Last but not least, let's look at Google. They enjoy 30% operating margins, and we all know that Microsoft's Online Division, which operates Bing, loses money every quarter. Bing represents a net positive for the economy.
I'm not arguing that we should be throwing money at also-rans just to keep the economy going. The point I'm making is that the mechanism of sorting out winners from losers in the free market has a negative effect on the overall health of the economy.