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Re: Dell Pay Customers to use Windows?

Roy Schestowitz wrote:
> Apologies if this was mentioned in COLA already.
> Dell are allegedly charging more for their open PC than they charge for a
> machine with a commercial O/S installed.

Keep in mind that Dell pays Microsoft for enough Windows licenses to
cover more machines than it sells.  Even if you don't get Windows
shipped with the PC, Dell is paying for the license.

> To me, this raises many concerns. Is it possible that Microsoft are funding
> hardware to preserve the integrity of their shackles?

Absolutely.  This was a key provision of the United States vs Microsoft
Antitrust Settlement.  Microsoft was given permission to "compensate
vendors who provide support for Microsoft in terms of hardware".
Microsoft made the case that if an OEM was investing in the research
and development to create special hardware for Microsoft, that these
OEMs should be given the chance to recover R&D costs.  That sounded
like a reasonable request at the time.

Many of those commenting against the settlement, including the Tunney
act feedback, pointed out that this clause would allow Microsoft to
punish OEMs who did not use hardware for which no Linux drivers were
available.  The DOJ ignored these warnings and Judge Kollar-Kotelly
accepted the settlement.  In practice, Product lines which use "Linux
Friendly" harware can cost as much as 4 times the cost of Licenses for
"Linux Hostile" hardware.

Keep in mind that Linux friendly hardware which can run Linux
immediately after being unpacked using the standard Linux Distribution
Installation media, is generally not subsidized by Microsoft.  This is
a direct defiance and contempt of court defiance of the court ruling
that Microsoft is not allowed to punish, penalize, or overcharge OEMs
who ship Linux enabled machines.

Ironically, most of the machines that are listed as "Linux Compatible"
are usually sold with Windows.  However, because these machines do have
a higher price, it's very easy for Dell to see when customers are
choosing Linux compatible hardware.  The other advantage is that Linux
compatible hardware will run Linux as a host operating system and the
End User can LEGALLY install Windows XP as a CLIENT to Linux in a
virtual machine.

It's a direct violation of the court rulings and the court order for
Microsoft to prevent Dell from installing Linux as the master OS and
Windows as the Client, but Judge Kollar-Kotelly has been unable to get
the issue properly addressed by "Appropriately affected parties".

I don't think it's a bad thing that Linux compatible machines cost a
bit more than the "Windows Only" machines.  I'd rather pay a 20%
premium to KNOW that a Laptop or Desktop I am purchasing to run Linux
will run ALL functions, including WiFi, USB-2, and SATA will work
properly with Linux.  I will also want a bit more muscle because I
probably WILL want to run Windows as a Client.

The extra VM will require more memory, more drive, and a faster CPU.

> Are they relying on expensive Office licences and
> user dependency through familiarity?

Yes.  Microsoft is very much depending on Office licenses, and has been
struggling to get these products sold through OEM channels.  Instead,
Microsoft has targeted the CIOs of the largest corporations, demanding
that they prove that they have licenses for EVERY employee, or forfeit
ALL MS-Office licenses.

Ironically, it is NOT illegal for Microsoft to attempt to market it's
products directly to these CIOs and CTOs.  Currently there is no direct
evidence that Microsoft has used illegal means to influence these
purchase decisions.

If ALL Microsoft is doing is asking CIOs how many copies of Microsoft
office they wish to order, then they are doing nothing illegal.  If on
the other hand, Microsoft is using fraud, extortion, blackmail, or
sabotage to force the CIOs to exclude competitors such as Open Office,
or to force CIOs to purchase licenses which are not actually needed,
then this would be illegal.

The irony here is that Microsoft has switched it's policy from allowing
one license to cover ANY machine used by an employee or contractor
(Office 95) to requiring a separate license for EVERY machine used by
an employee or contractor, including machines used at home.  Because
the Employers don't want to pay the additional costs of licensing home
machines or Laptops purchased with personal funds, they are encouraging
employees to use Open Office.  The same is true with Consultants and
Contractors, who also do not receive client funded copies of Windows.

Since OpenOffice and MS-Office are not mutually exclusive, more and
more companies and government organizations are starting to encourage
the publication of documents in Open Office Open Document format IN
ADDITION to MS-Office formats.  Many organizations are beginning to
insist on OpenDocument as they PRIMARY format as well.

> If so, is this not unethical?

Keep in mind that Judge Kollar-Kotelly decided NOT to resort to a
structural solution aimed at targeting ALL of the anticompetitive
practicel of Microsoft.  Since the procedural remedy was only going to
have Limited effect, Judge Kollar-Kotelly rule that she would implement
remedies for those who had provided direct testimony in the original
DOJ case.  At the same time, she deliberately left the door wide open -
stating that each competitor who felt that they had been excluded by
Microsoft, each customer who felt that they had been compelled to
purchase products and services they didn't actually want, and anyone
who felt that they were forced to pay excessive prices, would be
allowed to petition the federal courts based on the standing rulings of

There have been numerous such cases filed, and Microsoft has negotiated
settlements with most of these organizations.  The settlements usually
involve substantial payments to lawyers acting on behalf of a
class-action who negotiate useless "remediationg" using coupons for
Microsoft software.

Microsoft has had to incurr huge costs to defend against these
lawsuits, but each class action settlement has enabled Microsoft to
nullify all future claims by that class.  For example, since Microsoft
gave something like $2 billion in Microsoft Software licenses to public
schools (based on full retail value of Windows, Office, Visual Studio,
and Servers as well as full priced client licenses).  But this means
that no one in California can sue Microsoft for excessive charges or
excessive volumes of software.

> Must anti-trust be woken up again?

The real problem is that the Federal Trade Commision has been sleeping
and completely ignoring Microsoft's illegal activities since 1993.
They decided to turn the antitrust issue over to the DOJ after they
blew the Contempt of Court case in which Microsoft violated the 1993
settlement.  Microsoft was allowed to create and present an entirely
new set of "facts" in the case, and did so in such a way as to prevent
the DOJ from properly and legally addressing this distortion of the
evidence.  The irony is that the Appellate court decided to rule based
on these new "facts" rather than even remand them back to a court for
evidentiary hearings.

It seems unlikely that the Bush administration will be doing anything
to interfere with Microsoft's "right to innovate".  Bush had announced
his support for Microsoft's "right to innovate" early in the Republican
Primary.  It seems that Microsoft was an early and substantial
contributor to the Bush campaign.

At this point, the Open Source community should not count on the courts
to intervene on their behalf.  Such a scenario is highly unlikely.

On the other hand, Open Source Software is taking on the market very
agressively and Microsoft is really feeling the pinch.

Linux has captured a substantial portion of the server market,
including the Intel Server market.  Microsoft delayed "retiring"
Windows NT 4.0 for nearly 4 years because each attempt to force NT 4.0
customers to "upgrade" to Windows 2000 or Windows 2003 seem to result
in upgrades to Linux instead.

Open Source is much more widely accepted, and much more widely
recognized as well.  Customers are aware that their Cisco routers run
BSD, their Nokia routers run Linux, their Linksys, D-Link, NetGear, and
Belkin routers run Linux, and their Web Servers are running Apache.

Customers now know that they can get excellent Open Source support from
companies like IBM, HP, Dell, Computer Associates, Accenture, Computer
Sciences Corp, and of course Novell and Red Hat.

Customers know that more of the software they use on the web is also
based on Open Source products such as Eclipse, Apache, Jakarta, Struts,
and JBoss.  They know that even most of the commercial products they
have been using are now built on foundations of Open Source technology.

Even commercial products such as DB2, SAP, PeopleSoft, Oracle, and most
of the other "top names" now provide excellent support for Linux based
products and servers.

Corporate management is far more aware of Open Source and far more
aware of the benefits of Open Source than they were back in 1998.  Even
on the "desktop", Linux "desktops" are appearing on the desktops of
more and more "Network Computers" such as Windows 98, Windows 2000, and
Windows XP computers running X11 software, VNC, or even Remote Access.

In 1998, most CIOs didn't even know that they HAD Linux, and many
didn't even know what Linux was.  By 1999, CIOs discovered that over
17% of their servers were running Linux.  Today, nearly 80% of all
corporations with revenues in excess of $1 billion are using Linux for
at least some of their servers.  Most of these companies are also very
aware of Open Source and have Open Source strategies and policies in

Microsoft still maintains a strong hold on the small-cap companies,
companies with revenues of less than $10 million/year, but even these
companies are regularly using Linux powered "Appliances" such as
Routers, Cable-Modems, DSL Modems, WiFi hubs and extenders, Printer
Servers, and even File Servers or SAN servers.  Recently, we have seen
more external hard drives with SAN interfaces which are Linux servers.

Even though Microsoft still maintains it's presense as the logo in the
bottom left corner of the taskbar, the role of Microsoft is gradually
diminishing.  The role of Open Source, however, is growing more and
more significant.  The FireFox browser, the Thunderbird e-mail client,
Cygwin, the Open Office software suite, and Java are all becoming far
more critical to the success of the organization than all of
Microsoft's software combined.

> Are Dell just too blind to see an irrational pricing scheme? I once went to
> a restaurant where half a litre cost less than half than an entire litre.
> Is it merely a fluke or a master plan?

Actually, it is a master plan, but not of Microsoft's.  Companies like
Dell are using the higher priced "Linux Friendly" machines to guage the
interest in Linux on the desktop.  As I pointed out before, Dell isn't
just looking at the machines that are sold WITHOUT Windows.  Dell is
VERY interested in the number of machines sold WITH Windows but at a
HIGHER PRICE than comparable "Windows Only" machines.  When Linux users
are paying the premium, and getting the Windows license, it takes the
wind out of Microsoft's claim that these "Linux Machines" are merely an
attempt, by software pirates, to evade Microsoft's License fees.

Dell is one of several OEMs getting hammered by the proliferation of
"White Boxes".  For years, the assumption was that Microsoft was right,
and that these customers were simply transferring Windows licenses from
old Dell machines or other old machines to these new "White Box"
machines, then wiping the old hard drive completely clean.  Many
companies were even putting Linux on the old machines before sending
them to "recyclers" or donating them to charities.

Dell has been using Lease programs to try and maintain a bit more
control over the flow of the machines and their licenses, but even then
it's becoming obvious that more of these "White Box" vendors are
capturing market.  In many markets, Asia, India, South America, Central
America, and Africa, as well as eastern Europe, Dell is even finding
that there is less market for "Windows only" software.

Dell has also been discovering that HP has developed a Winning strategy
for marketing it's 64 bit laptops and desktops by making sure that they
are Windows AND Linux compatible.  At one point, they even offered a
special version of SuSE Linux with drivers specifically for these
machines.  Today, SuSE/Novell now offers newer distributions which are
fully supported by HP's more expensive "Proliant" line.  The cheaper
Windows Only "Compaq" lines have been harder to sell and tend to bring
smaller profit margins, even with subsidies from Microsoft.

Microsoft has seen the writing on the wall, and they know they have
been numbered, weighed, and measured.  They know that it couldbe a very
short time before Linux begins to become a critical part of Microsoft's
strategy.  Microsoft knows that eventually they will have to "Play
Nice" with Linux or risk losing relevancy entirely.

> http://hardware.slashdot.org/article.pl?sid=05/10/08/034211&tid=190&tid=137
> Roy
> --
> Roy S. Schestowitz      | "Black holes are where God is divided by zero"
> http://Schestowitz.com  |    SuSE Linux    |     PGP-Key: 74572E8E
>   6:20am  up 44 days 18:34,  3 users,  load average: 0.28, 0.39, 0.42

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