At $110 Billion, Microsoft Windows Is Most Valuable Software Franchise
If we looked at the software businesses of IBM, Microsoft, Oracle and EMC on a standalone basis, which business would be the most valuable?
| Software Business Segment | Trefis Estimate, December 2010 | Trefis Estimate, November 2009 |
| Microsoft Windows OS | $110 billion | $101 billion |
| IBM Middleware | $107 billion | $103 billion |
| Microsoft Office | $86 billion | $83 billion |
| Oracle Database Software | $69 billion | $67 billion |
| Oracle Middleware Software | $44 billion | $41 billion |
| EMC Storage Software | $23 billion | $21 billion |
In November of 2009, we ranked the world’s most valuable software businesses. (See Nov’09: The World’s Most Valuable Software Business) IBM’s Middleware (at $103 billion) came out on top, just ahead of Microsoft’s Windows Operating System (at $101 billion), while Microsoft Office came in third (at $83 billion). Other companies in our list included Oracle and EMC. One-year later, we have decided to revisit the analysis to see if the software landscape has changed.
Microsoft Windows Surpasses IBM Middleware
While most of the businesses continued to retain their position, Microsoft’s Windows Operating System emerged as the single most valuable software business segment in 2010. Microsoft Windows Operating System (at $110 billion) surpassed IBM’s Middleware, which at $107 billion now stands at a comfortable second. Microsoft Office managed to retain the third position at $86 billion.
Trefis estimates a price of $177 for IBM’s stock, which is 22% above its market price, with Middleware Software constituting 46% of it. For Microsoft, we have a price estimate of $31.60 which is 16% above the market price. Windows Operating System is the largest segment for Microsoft, making up about 41% of Microsoft’s stock, followed by Microsoft Office which contributes 32% to the company value.
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Windows Operating System
Microsoft offers Premium and Standard versions of the Windows Operating System to run software applications on laptops and desktops. Its customers includes PC OEMs such as Dell, HP, Acer, Toshiba, Sony etc. as well as consumers and corporates who are upgrading their OS. Windows 7 is the most recent version of the product. Microsoft’s Windows competes with operating systems offered by other firms like:
Increase in PC Shipments and Success of Windows 7Microsoft Windows Surpasses IBM Middleware
Big money for MSFT
Trefis estimates a price of $177 for IBM’s stock, which is 22% above its market price, with Middleware Software constituting 46% of it. For Microsoft, we have a price estimate of $31.60 which is 16% above the market price. Windows Operating System is the largest segment for Microsoft, making up about 41% of Microsoft’s stock, followed by Microsoft Office which contributes 32% to the company value.
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Windows Operating System
Microsoft offers Premium and Standard versions of the Windows Operating System to run software applications on laptops and desktops. Its customers includes PC OEMs such as Dell, HP, Acer, Toshiba, Sony etc. as well as consumers and corporates who are upgrading their OS. Windows 7 is the most recent version of the product. Microsoft’s Windows competes with operating systems offered by other firms like:
- Apple Mac OS X
- Open Source software companies like Red Hat and Novell that support Linux distributions
The increase in Windows Operating System valuation during 2010 can be attributed to two major developments:
1) Increase in PC shipments: Worldwide PC shipments will reach 352.4 million units in 2010, a 14% increase from 2009, according to the latest preliminary forecast by Gartner, Inc. [1] As a result, sales of Windows OS improved significantly over the past year. Windows OS also dominated the netbooks market (at 68%), which was the main growth driver for PC sales.
2) Windows 7 gained share: Windows 7 launched during late 2009 and received a positive response vs. Microsoft’s prior Windows Vista product. Windows 7’s share of operating systems increased from 7.5% at the beginning of 2010 to nearly 20% in November 2010 (based on web usage statistics). [2] While most of this growth came at the expense of other Windows Operating Systems like XP and Vista, it helped Windows to slightly gain market share when adjusted for piracy.
View our complete analysis of Microsoft’s Windows Operating System business here.
IBM MiddlewareMiddleware is a type of software “plumbing” used to connect different software applications that need to share information. Middleware is commonly used by businesses that have a variety of separate software systems to make information integration easier. By making it easier to integrate and share information, businesses can work more efficiently and better serve customers.
Examples of middleware in use:
- A hospital that has multiple software applications for tracking patient information across medical segments can use a middleware database program to more easily share important patient information between applications. This means that physicians and nurses will be able to access the latest patient information more easily.
- A customer who views his savings balance online through his bank’s website while also checking on the status of a recent mortgage application is benefiting from middleware software which is integrating information from different parts of the bank’s operations (savings and mortgages) and delivering it to the website.
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