Half Life, Get a Life, Had a Life, Life...

Dear ladies and gentlemen,

Recently we have read an article devoted to retail sales of the pirated version of Half - Life 2 in Russia (http://www.theinquirer.net/?article=13573) published on 12.01.2004.

We really appreciate that you pay interest to the problem of piracy in Russia, but this article contains photographic material that depicts products published by 1C Company.

Unfortunately we can't control all retail dealers selling PC games in Russia (including 1C titles). Some unscrupulous retailers really do sell both official localizations and pirated versions.

1C Company is the major Russian publisher that has always fought piracy in Russia and sold ONLY official versions of games. 1C Company is working with the biggest worldwide publishing companies (such as Atari, Vivendi Universal Games, Take 2, etc.), always stands for sales of only legal game copies and values its reputation. The fact that our product (Operation Silent Storm) on this photo is located in the vicinity of a pirated software product may breathe on the name of our company in the opinion of our international partners.

In this case I would like to ask you whether it would be possible to remove the image of the jewel-case that contains our game or mention that this product is an official one. Or maybe find another solution suitable for your edition.

Thank you in advance!

I'll be glad to assist you in any possible way.

Sincerely yours,
Anatoly Subbotin
PR Manager
1C Company

Consumer rights wide when you buy online

Dear Mike

I would like to put forward our side of the story regarding the consumer rights article. First of all we will always respect a customers rights set by the Distance Selling Act and will do our utmost to ensure customer satisfaction.

The monitor in question was the Hercules 920 DVI Prophetview which was unfortunately dead on arrival for the customer. Due to the time of year and the relatively new arrival of this product, stocks were very short and we didn't have any available for the customer to place a new order and receive within a reasonable period of time. This was entirely the reason why it was suggested that the route of returning and replacement would be the best bet. We were able to send the monitor off to Hercules and have the item replaced directly which saved considerable time in the return of the said monitor.

Usually we do try to aim for a same day or 2-3 day turnaround at worst when dealing with returns but as I'm sure you can imagine, the Christmas period is always a busy one! On January the 15th the replacement monitor left ourselves for the delivery to the customer but due to circumstances still unclear, the item has failed to be delivered either due to the customer not being at home or the item becoming lost in the courier channel.

Naturally we will ensure that this situation is rectified and at no point would we refuse to allow the customer his or her rights when buying from ourselves. I hope that this puts across our position in this matter and that it can be resolved quickly.

Regards

Dave Hutchinson
Overclockers UK
Technical Manager

Charlie Demerjian's opinion piece is a great work of fiction
Lynch Mob

Wow... what a diatribe that turned out to be; just to allude to Charlie being off his rocker. ROFL.... ;-)

For the record, I agree with Charlie. The great and illustrious vole quakes at the mention of Linux and the Open Source Community (or OSC.. let's make our own acronyms and FUD here shall we?). The large energy company I contract to uses NO Microsloth server in production (they use Linux boxes for authentication.. can you say... SAMBA?) and is considering Linux and OpenOffice everywhere within the organization.

Thanks,

pete

Mob Lynch

There are a number of different means for doing this comparison, but the most popular method is to compare the trailing Price-to-Earnings ratio (P/E) of the stock: the price of a share of the stock divided by the company's total earnings for the previous four quarters.

- Microsoft's current P/E is about 30.
- Oracle has a P/E of about 28.
- Electronic Arts has a P/E of about 41.
- SCO Group has a P/E of about 50.
- Red Hat has a P/E of about 400.
- Sun and Novell don't have P/E ratios currently, since neither was profitable last year.

By the standards of the software industry, Microsoft's share price is actually quite low.

So MS's PE is about 30. In other words, you could get a better return by putting your money in a high-interest bank account. But another comparison he doesn't mention is "price to asset value" or whatever the technical name for that is. I understand for MS that is about 500%. In other words, every $ you spend on shares will buy you about 20c in assets. That's a lot of downside, should MS hit real competition! And it also means MS has a LOT of room to slash prices to compete. Just pray that MS doesn't have to, or most of that 80c you paid in premium will just vanish :-)

Cheers,
Wol

Lych Gate

Charlie Demerjian's piece was indeed fundamentally flawed in its financial analysis. However, Mr. Merrill's response was not simply flawed, it was disingenuous. Using the link to the most recent annual returns that the author provided in his own letter, one can learn that Microsoft made $8.4 billion in profits from its OS monopoly, and over $7 billion from its MS Office monolith in 2003. That totals over $15.4 billion in profits, with around 80% profit margins. During the same time period, Microsoft made a total of $13.2 billion as a company. Thus, over $2 billion of its profits from its OS and Office divisions went to cover losses from all of its other divisions and investments combined. The results from 2002 were very similar. Thus it is very clear that Mr. Merrill's argument that Microsoft isn't using its OS and Office divisions to cover the losses of all of its other divisions is at best misleading.

His point about Microsoft's stock price is similarly disingenuous. While Microsoft's PE ratio is in line with the companies he listed, most of those companies have inflated PE ratios as a result of recent financial difficulties which they can be reasonably expected to overcome. (The PE ratios of the entire industry were horribly inflated before the crash/correction, but that is a different discussion. Hopefully most investors have learned their lessons.) Unlike most of the companies listed, Microsoft has not suffered serious declines in revenues or profit margins during the most recent economic downturn. In fact, their profits have generally increased around 10-15% per year throughout the economic downturn.

In reality, Microsoft's PE ratio of 30 reflects Charlie Demerjian's original point: Microsoft's stock price can only be supported by continued rapid growth. If Microsoft's profits remain steady, then anyone who purchased Microsoft at a 30 PE would receive a 3.3% return on investment. That is less return than a guaranteed 10-year US government bond. Given the legal and competitive situation that Microsoft finds itself in, even its most ardent supporters will certainly agree that a reduction in Microsoft's profits is more likely than a total collapse of the US economy.

The only reason that Microsoft's PE ratio can be sustained is because Microsoft's profits are continuing to grow at around 15% per year. That growth rate means that the rate of return is much greater than the PE ratio would indicate. If Mr. Demerjian is right in his supposition that Linux OS and open source software will cut into Microsoft's margins on Windows and Office, then he will be right that the stock price will fall hard.

The most disingenuous part of Mr. Merrill's letter, however, is in its overall content. His letter provides a detailed analysis of Mr. Demerjian's financial misstatements, but barely touches upon the fundamental basis of the original analysis. It is essentially a distraction from the central point: real businesses and real governments that would otherwise be using Microsoft OS and Office software are instead using Linux OS and open source software. China, Israel, India, several parts of Europe, and now some large American corporations are looking at Linux and open source as viable alternatives to Microsoft. Whatever Microsoft says about the “total cost of ownership”, they are loosing real sales in real markets due to cost comparisons. Mr. Demerjian's central point is undeniable: Microsoft's software is only worth what other people are willing to pay for it, and at least some other people are willing to pay less for it now that Linux and open source software are becoming viable competitors. That is the first real threat to Microsoft's margins in its core business that has existed since the company became one of America's largest corporations.

Microsoft is very concerned. If Mr. Merrill has money invested in Microsoft, he should have some concern as well.

Thank you.

JC
(Full name, email address supplied)