Scoble pointed out
this brilliant example of what looks like either [at best] absolute incompetent mathematical or brilliant twisting of numbers in the age-old con artist tradition:
Most analysts think the price of Windows to our hardware customers, people like Dell Inc. (DELL ), is about 50 bucks. If you stop and think about it, most people are going to own their PCs for four years. So do we offer $12 a year of value where you can run tremendously more applications, it's tremendously easier to take care of? It's $12 a year when people are spending $90 to $100 a month on cell-phone bills, and we're talking about saving you hours and hours of time. I think it's a pretty good value proposition, myself.
Let's examine this for a second.
First, he claims that “most” analysts “think” that Dell pays $50 per copy of Windows. Ballmer knows the truth about that number, but why let truth get in the way when there are soundbites to be made?
Second, claims that most people keep their hardware for 4 years. Of course, this also assumes that everyone who uses Windows bought their hardware from Dell, yet another layer of cloudy logic.
And then he takes the alleged estimated wholesale cost of a piece of software and divides it by the end-user's alleged hardware lifespan. This is wrong on every count. Even if the numbers were right (which doesn't even matter), you can't compare Dell's cost to the user's cost and you can't compare the user's hardware lifespan to their software lifespan because of the fact that you can install other versions of Windows on existing hardware (otherwise Windows wouldn't come in a box).
Unfortunately, his fuzzy math is going to spread like wildfire around the internet and most aren't even going to bother noticing the smoke and mirrors tricks he's using. Considering most of those who will be guilty of this will be journalists and programmers, I consider it unforgivable and insightful.
The true cost, in my opinion, is closer to 3-4 times the amount Steve pulls out of his hat. For myself, the cost is higher than that (I'd say around $120 a year, but that number will be going down a bit in the next 2 years unless I have to buy another copy of XP) which is still a good deal as far as I'm concerned, but that's beside the point.