Free software is becoming easier to obtain with the spread of broadband internet. People will have less reason to buy the software, and the prices for software will go down reducing profit margins.
Linux OS is being adopted in emerging markets which will hurt growth. Earlier in April 08, Micorsoft Corp. (MSFT) announced its second "Fair Play Day" in 14 Latin American countries, where investigations led to the seizure of more than 160,000 counterfeit copies of Microsoft software. The contraband had an estimated street value of $18.2 million. This is just the latest attempt by the software giant to try to stem the rising tide of counterfeit products that costs the company millions of dollars annually in some of its most promising markets.
"The crackdowns are part of Microsoft’s global Genuine Software Initiative, which aims to help protect legitimate distributors and customers from the effects of software piracy," said Microsoft SA partner executive Mark Reynolds. Microsoft is also trying to protect its bottom line, which has been sharply undermined by the rise in piracy. For its fiscal third quarter ended March 31, Microsoft net income fell 11% to $4.39 billion, or 47 cents a share, mostly the result of a 24% drop in sales for the company’s flagship Windows software.
Microsoft’s general manager of investor relations, Colleen Healy, attributed much of the sales decline to the cottage industry that has sprouted around an upswing in the number of unlicensed PCs on the market. "Q3 was a tough quarter on the unlicensed front," Healy told CNET. "We had been making gains there for the past several quarters."
The company made special notice of it in its fiscal third-quarter earnings, released Friday: "While piracy adversely affects U.S. revenue, the impact on revenue from outside the U.S. is more significant, particularly in countries where laws are less protective of intellectual property rights. Similarly, the absence of harmonized patent laws makes it more difficult to ensure consistent respect for patent rights," the company said.