I write in the wake of the WannaCry ransomware attack, which has infected nearly a quarter of a million Windows PCs worldwide. Many victims must now be casting wistful eyes at alternative computer operating systems: Apple’s macOS, or the non-proprietary, lesser-known GNU/Linux.
I haven’t used macOS since the 1980s, can’t plug or pan. I post today to update the saga of my year-and-a-half old transition to Linux.
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I still use Linux. I’m glad I switched. I haven’t looked back.
I can do ninety to ninety-five percent of what I used to do in Windows as well or better in Linux. Linux is free, so I don’t have to accommodate revenue-protecting delays for product activation, digital licensing. I trust Linux developers vastly more; I’ll never forget Microsoft’s use of tactics judged malware-like to introduce Win 10, and thus would regard any internet-connected computer running Windows as a potential enemy. I also much prefer the look and feel of my GNU/Linux “distro” of choice (Linux Mint with the Cinnamon desktop). My day-to-day computing experience feels superior.
The remaining five to ten percent of “what I used to do in Windows” still gets done in Windows today, albeit in an offline, software-only Windows “virtual machine.” (As explained in my 2015 post) I can’t edit .pdfs, process camera raw files or layout desktop published pages in Linux as I can in big buck commercial Win software.
The thirty-eight gigabyte Windows 7 virtual machine that runs this commercial software feels locked in amber, stuck in time. I won’t put the VM online, ever, for fear of being dragooned into a nefarious “upgrade.” The VM is reasonably up-to-date by late 2015 standards, for now and evermore.
VirtualBox is not user friendly. I also feel uncomfortably bound-at-the-hip to Hewlett-Packard peripherals, which are reputed to play better with Linux than competitor offerings. I like my new European-voltage HP printer, but also might have liked to comparison shop.
If Microsoft strong-armed the Win 10 roll-out because it could, I jumped ship to Linux because I didn’t have to go along. Maybe I can’t stop the only grocer in town from doubling the price of bread, but the grocer can’t stop me from baking my own if I have yeast, flour and a cookbook.
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There is very little altruism in finance.
… Benjamin Graham, Security Analysis, 1934.
I think that Microsoft’s tactics in the Win 10 roll-out should have been illegal, but also am not surprised that a publicly traded Fortune 50 corporation would take such extreme steps to protect a revenue stream.
Mutual funds and other big institutions own most of Microsoft’s eight billion outstanding shares. The Vanguard Group alone holds more than half a billion, on behalf of various Vanguard funds fueling IRAs and 401ks. In 2016, the California public employees retirement system commanded about twenty-two million shares; the Canada Pension Plan investment board, about ten million.
An “index fund” will blindly hold the stock as long as it belongs in the index in question, no matter if the CFO soberly stewards the corporate ship or romps naked across interstates. Other investors hold the shares because they want money from them. They can get the money from dividends — now $1.56 per share annually for MSFT — and/or from capital appreciation, if the share price goes up.
The main short term mover of share price is EPS: earnings per share. Is the corporation selling lots of stuff? Is it making money? Consider, dear reader: it has to make money, needs its revenue stream as urgently as a mammal needs air, water, food. Shareholders hover anxiously over that revenue stream, fuss over the ratios — P/E, Price/Sales, FCF/Sales — that measure it. They notice changes. Quickly.
Selling lots of stuff + making money = all may be well on the balance sheet. I own shares in Kimberly Clark. They sell personal care products, including toilet paper. People are going to keep buying toilet paper. I’m grateful that they will, especially when they ride the metro with me. Feel free to think of ol’ Tim the next time you buy a roll.
(Or while using it, if you dislike this blog. ‘I need to cast a vote for Ronald Reagan,’ former California governor Pat Brown used to say, before trips to the toilet. I’ll be in famous company.)
Secure revenue stream! The toothpaste, soap and blended frappe consumed on Monday can’t be re-materialized for fresh consumption next week. Y’all gotta buy ’em again.
What if the company sells something that only should have to be bought once?
What if the company can’t pile in any more bells and whistles? What if the old, already-paid-for version works just fine?
What does the company do then?
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The scene: the boardroom of a publicly-traded corporation selling software in this precarious category. The CEO raps a gentle knuckle on the conference table for order, casts affectionate eyes at the industry veterans seated before him.
“Our little multinational is forty years old this week! Can anyone believe it?” He nods mischievously at a gray-haired colleague seated across the polished black walnut. “Lance! You think I’ll ever forget when you dumped that beer stein on our floppies at ’82 Comdex?! Half our inventory! We almost went belly up right there!”
Board members chuckle as Lance — a senior VP, worth millions in the corporation’s stock shares alone — hunches shoulders, mimics fear. The CEO lofts an arm.
“Raise your hand if you remember ten megabyte hard cards! C’mon, Dick, get your hand up; we were on the same team. How about hacking 286 protected mode? 12 megahertz; that was a CPU speed demon. Now I think 2 gigahertz is slow. Change came hot and heavy in those days.”
“We kept up with it,” says a board member, another multi-millionaire shareholder. The CEO grins, points a pistol finger.
“Bullseye. We did keep up with it. It’s been a long, strange trip, and we helped lead the trip. We served our customers. That’s why we’re where we are today.”
Slowly, deliberately, the CEO lets his grin fade. The board room quiets; something is coming.
The CEO pushes back his chair, rises slowly.
“We kept up,” he says. “But let’s be frank: there’s not much new these days to keep up with. Is there?”
Silence. The CEO lets the seconds tick past, nodding slightly, as if to acknowledge his own broaching of a taboo. He holds up splayed fingers, presses one down. Counting.
“What’s new and exciting now? Kaby Lake? DDR4? USB 3.1? Improvements, no question, but how much do they affect what we do? What our software does?” The CEO lowers his hand, looks pained. “You’ve heard what our critics say: the only reason we keep pushing new versions is to chisel more Benjamins out of our captive user base.
“And you know something? They’ve got a point.”
Silence. One board member slips a smartphone out of an inside coat pocket. He bows his head, moves quick fingers on the screen.
The CEO doesn’t notice. His eyes look bird bright, feverish.
“They’ve got a point. Friends, family: we’re at a crossroads.” He raises the hand again, counts off a finger. “Choice A: we can chase ARPU revenue with a software-as-service model. That would make the cash registers ring, but the EULA would be a privacy rights nightmare. We’d have to malware it onto hundreds of millions of PCs worldwide. Some of our pals in the computer press will carry our water if we buy ads and dole out book contracts, but I’ve got to look at myself in the mirror tomorrow.”
Board members squirm. Seat cushions creak. Two exchange significant glances, then pull out their own smartphones. A third follows, then a fourth. (E-trade. Ameritrade. My shares! What’s my log-in?)
The CEO laughs suddenly, too loudly. His hand shakes as he counts off a second finger.
“Or there’s Choice B: We call it a day. Stand pat. Security patches. Minor updates. But no new version unless our users can really benefit from a new version, and let’s be frank: at this stage, that may never happen. We’re officially in wrap-up mode.”
Silence no longer. Lance looks sick. By now half at the table have smartphones out, busily key in passwords for brokerage trading apps. (Sell, sell! Worry about the 10b5 rules later. Better judged by twelve than bankrupt by 6:00.)
The CEO looks triumphant. Spittle gleams on his lips.
“Of course, that’s going to put a dent in our cash flow. A big dent. A crater. Our shareholders are going to get one lollapalooza of a negative earnings surprise at our next conference call, and can expect plenty more of the same in the future.
“I’m still confident that stakeholders like you will want to hold onto your shares, out of the legendary personal loyalty that stock market investors so regularly show to the companies they own shares in.”
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Not very realistic.
I humbly regard good government as important, think a marketplace can be carefully and respectfully regulated to check excesses. World Cups and World Series require referees. Alas, it’s tough to expect honest watchdogging from a U.S. Congress that would sell its citizens’ online privacy down the river, as in the recent vote on FCC privacy rules.
Europe hasn’t forgotten Adolf, the Stasi or the KGB, and does a better job of helping Jonas Q. Public keep his online shades drawn. The EU also still has reservations about Windows 10. (And Facebook) There may be hope!
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