Microsoft Backs Out Of Wi-Fi Equipment Market

Glenn Fleishman writes "Say it ain't so! Microsoft makes good consumer Wi-Fi equipment but is exiting the market, News.com reports. They'll sell out their inventory, but won't make new models or produce new product. I can't recall a case in which Microsoft had viable products and decent sales and exited instead of spending more money to compete more effectively. Or even when they had non-viable products (Pocket PC's original OS) and spent years and billions before they had something that worked. Perhaps competition from Cisco (Linksys subsidiary), NetGear, and even Apple (which has a disproportionate marketshare) made MSFT blink."

Margins, Margins, Margins

[prostoalex]

Sales does not mean profits. Even though the sales of WiFi products more than tripled in 2003 [itfacts.biz], the revenue growth of the market wasn't as good. Which means one thing - together with high demand the prices are falling down dramatically, and by now the WiFi equipment is heavily commoditized and thus outsourced to Chinese/Taiwanese/Indonesian manufacturers [itfacts.biz], which in the hardware world generally means no one else is expecting to make any money off of it (the same for Ethernet network cards, CD-Rs and other products).

The market will grow (in fact there are 700K WiFi networks [itfacts.biz] right now, and much more are expected), but the margin range is just not there - I wouldn't be surprised if by the end of the year the WiFi prices hit such a rock bottom, that some manufacturers will in fact lose money.

Apple is doing very nice [businessweek.com] - 20.2% of the 802.11g market, the first-mover advantage, and leading in revenues, outrunning even Cisco (according to Business Week). But (a) we still have to find out what the profit margins are on Apple WLAN equipment and whether SteveJ got his R&D expenses back by now, and (b) Apple is one company that is uncapable of fighting price wars. Pitch Apple against a Chinese clone factory pushing millions of WiFi access points and networks cards at half the prices, and market share is eroded. Unless Apple finds some way to lock up consumers into buying its products (easy to do with Powerbooks, not so easy with Airport access point buyers), they won't do well either in this market.

I prefer linksys

[dalmiroy2k]

Microsoft does have some decent hardware like the Intellimouse Explorer but for WIFI I'd stick with Linksys, a division of Cisco Systems, Inc.

Game controllers

[WolfTattoo]

I can't recall a case in which Microsoft had viable products and decent sales and exited instead of spending more money to compete more effectively.

Actually, there is another market Microsoft backed out of recently, game controllers. Microsoft's Sidewinder line of Joysticks and gamepads was actually quite good. Their gamepad was the defacto standard for the PC for quite some time.

Re:Microsoft hardware...

[LostCluster]

Mitsubishi [mitsubishi.com] is a consumer products maker with lines of computer monitors [mitsubishi-display.com], high-end TVs [mitsubishi-tv.com], and cell phones [mitsubishiwireless.com] among other things, as well as a well-known car maker. [mitsubishicars.com]

Yes, all of these companies are related.

Re:Well, that sucks

[Kamel Jockey]

Microsoft USB wireless adapters actually work very well with the Redhat and Fedora Core Linux distributions... if you use the open source Linux-Wlan NG [linux-wlan.com] drivers. I would seriously recommend them to anyone who wants to use 802.11b with Linux.

If I saw someone else point this out...

[KrispyKringle]

I wouldn't bother. But I don't.

Cisco (Linksys subsidiary)

I think you've got that backwards. Cisco owns Linksys.

Unless I'm on crack. Not trying to harp on something stupid.

Re:Say WHAT?

[canajin56]

I have. Had to return it. Didn't work with XP. WEP was certainly not on by default. If it was turned on, it would no longer connect to the access port. Any other brand of card worked fine with WEP turned on, but not the MS card. Of course, it gave no error messages. You just tell it to connect, give it the key, and it says ok and then doesn't connect.

Re:Say WHAT?

[ProppaT]

Well, if you guys think Logitech keyboards are any better (and generally they're worse to be honest), you don't know keyboards. I'm using the first decent keyboard I've found to buy in years. It's an Intcomex. I has one of the most natural ergonomic splits I've ever used and the keys are nearly as sturdy as an old 80's big blue keyboard. Of course, if you're typing anywhere under 50WPM you could probably use one of those roll up, travel jelly keyboards and be fine. But if you're a real typer, you're not going to be happy with many consumer keyboards. And, for the record, MS mice are great. Better than Logitech for me and many in my office because they seem to fit our hands while the Logitech ones tend to be a little small and unergonomic.

Re:Are you talking about a different MS?

[AJWM]

We are talking about the same MS, right?

The same MS who jumped into the game console market with Sony and Nintendo? Who wrote Word and Excel, when the market already had Wordperfect and Lotus? Those guys? The ones who wrote Internet Explorer when Netscape was already on it's third release?

I'm not sure about Word, but MS bought Excel. As for IE, they bought (well, sorta) Spyglass which was based on the same Mosaic code that the Netscape authors wrote before they started Netscape.

(The "well, sorta" for Spyglass/IE is that the original deal was to pay a percentage of the selling price ... which turned out to be $0.00. Spyglass ultimately sued and MSFT settled with a lump sum payment.)

You can say what you like about MS, but don't say competition scares them.

Competition terrifies them. They make enough on Windows and Office (80% margin) that they can throw money at all their other business lines (which are net losers) in the hopes that something eventually sticks, but the thought of real competition in their core market, that they can't buy their way out of, reduces them to panic. As witness some of the bizarre things they've been saying and doing over the last year or two.

That said, though, you raise interesting points and a valid question.

Re:Past hardware pullouts

[The Patient]

I got one of the phones when they first came out, and I think what probably killed it was feature-itis: I recall doing a whole lot of futzing around to get the software working properly -- probably more futzing than up with which Joe Sixpack would put =). That, and the voice recognition was a bit sporadic; that may have been because the demands of the software may have been a bit ahead of the 1998 hardware available at that time. The software would only run on Windows 95 and 98, as well -- Windows 2000 choked on it.

Oh, and there was that $200 price tag ...

As for the speakers, I still have them. THEY were a snap to set up, and they still sound fantastic.

Re:Say WHAT?

[Wolfstar]

I have. They're phenominally easy to use, and basically force you to set 128-bit WEP as the default. The newer ones suggest you use 256-bit WPA, which works hunky-dory with Apple's WPA implementation. I have a MN-700 base station a short distance from me right now and it absolutely screams.

What planet are you on, dude? I've got an MN-500 sitting three feet from me. You know what it's doing? Accepting wireless connections in the clear from anyone in range. And no, it's not because I'm a selfless soul. In fact, all it's doing is sitting around playing WAP and switch for a few systems behind a LEAF Box [sourceforge.net] simply because it doesn't have the friggin' HORSEPOWER to handle standard loose UDP methods in a NAT scheme. Asheron's Call - a game Microsoft PUBLISHED and currently controls the billing for - cannot be played on two systems behind it. I would assume the same goes for EQ or most other online games that use multiple port-triggered UDP connections.

Not to mention that WEP is OFF by default, it doesn't force you to use it at ALL, and in fact they make it WAY more difficult to turn on (especially at 128-bit) than it actually needs to be - enough so that most normal people wouldn't even bother with it.

Frankly, I love Microsoft's input devices (be they voice, mouse, keyboard, Joystick, or oddities like the Strategic Commander, regardless of whoever makes them), but their networking equipment is far beyond subpar.

Cisco bought Linksys

[jonasmit]

Perhaps competition from Cisco (Linksys subsidiary),...

Your sentence reads as if you think Cisco is a subsidiary of Linksys. I am quite sure you meant it the other way or I am misreading your sentence.

Not true

[davegust]

Their keyboards and mice are, of course, made by Logitech. They are simply branded as Microsoft

Microsoft Keyboards are supplied by Keytronic. The mice are manufactured by Flextronics.

Logitech considers Microsoft their number one competitor in keyboards and mice.

Re:Say WHAT?

[badasscat]

Like their keyboards and mice, they're damn fine products.

Let's not overdo it here. Their keyboards and mice are mediocre at best, just as their wi-fi equipment is. I owned an MN-500 when it was first released, and the thing wouldn't hold a connection for longer than 30 minutes. Turned out it was a known problem that a lot of other people had as well. I took it back, got myself a D-Link and haven't had a problem since. (Note: I'm not endorsing D-Link, just saying MS's products are no better.)

MS has a ton of competition in the wi-fi market. It does seem surprising that they don't see it as a viable revenue stream but it may just be a case of one too many products taking away from their core focus (which is still OS's and Office software). It would be very hard for them to really become dominant in wi-fi because the field is so crowded; it's not a case of beating one or two enemies, as it is in PDA's or game consoles. They'd have to take down many, many well-established and respected companies. They probably just decided it wasn't worth the effort.

As for their keyboards/mice, I just want to say that people who think these are the best of the breed just have not used a real keyboard and/or mouse. Find an IBM Model M or Northgate (Avant) keyboard and then tell me any MS model is even in the same class. MS's keyboards are the same "good enough" level of quality that everyone else seems content to make these days; rubber dome, mushy feel, questionable build quality. Calling them "damn fine" is like saying a Firebird is a damn fine sports car or the Sizzler makes a damn fine steak. Both are serviceable, but hardly in the same class as a Porsche or a Peter Luger. MS's wi-fi equipment followed the same pattern; nothing really to distinguish it from anybody else, and with the same intermittent firmware issues as every other manufacturer seems to have.

They did the same with game controllers

[Lurks]

I can't recall a case in which Microsoft had viable products and decent sales and exited instead of spending more money to compete more effectively.

They did exactly the same in the games controller market. They were the market leader and were making a profit but pulled out anyway. The reason is, they don't like competiting in hardware with low margins. Strategically it's not something Bill wants to do.

Not a strong profit margins.

[jellomizer]

You forget that Microsoft is a publicly traded companies. So they are managed by bean counters. Because WiFi equipment is extremely competitive (keeping price down) they cant stay competitive with the other guys who are making the products that are going down in price to the sub $100 category. And keep a high profit ratio. The accountants at Microsoft don't care how well the product works just check to see how many are how much they cost to make (beyond just the parts), how much they sell it for and the percentage of profit they make. So even though they are making a profit selling the products it is not as high as the investors want so they stop the product line. The reason the Mice, Keyboard, Joysticks often sell better because the %s are better. Heck how much does it cost to make a mouse. Including labor $10 and you sell it for $20 They make a 100% profit. Or a keyboard which probably cost $12 to make and they sell it for $80. Those are pretty good ratios. now WiFi equipment is a bit more complicated then a mouse or keyboard. So they could cost $50 to make and they sell it at $75. So the profit ratios is way less plus they are not selling a ton of them like mice and keyboards, Plus the fact that wifi equipment you hide in a little spot in your house it doesn't have much of an advertising value like a mouse or keyboard would were everyone sees it.