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To: Microsoft Internal
From: Walmart/Linux Taskforce: Robin Bradshaw, Christine Briggs, Mark Croft
David Hoffman & Tom Perrier
CC: Rogers Weed
Date: May 16, 2006
Microtel PCs without an operating system (”naked”) first started appearing on
Walmart.com in CY 01. We responded by working with Walmart.com on the language
that was used to market those PCs. The focus was on “anti-piracy” messages.
The first Microtel Lindows PCs appeared on Walmart.com in June 2002. We are
responding with a taskforce and coordinated efforts to understand the
situation and intentions of all parties involved.
To date, there has been a lot of press about the Linux PCs selling on
Walmart.com (See attached list of articles.) The media has been mixed, some
telling a positive story about the Linux efforts and some pointing out the
flaws in the offerings. One consistent message is that these are “substandard”
PCs based on today’s technology advances.
There is one critical data point we are missing: volume. Walmart will not
disclose the volume of Microtel PCs they are selling, and Microtell has told
us they are under a “non-disclosure agreement with Walmart.” We have been
working on some tactics so attempt to obtain volume estimates, but at this
time, we can’t confirm any numbers.
- - We understand that Microtel is shipping approximately 100 units per week on
- - We understand that most of the volume is at the $199 price point.
- - We understand that most of those systems are shipping with NO OS. (Naked
- - We understand that there has not been a customer satisfaction issue. Walmart
sets fairly strict standards for customer return rates and service calls.
The PR activity and focus from Walmart has definitely increased out efforts to
understand the Linux threat on the desktop. Several Linux PCs were purchased
and evaluated. See the summary of those findings below.
Linux on the Desktop
Microtel is a small system builder in the City of Industry California. A couple
of principles in the company came from a previous OEM Mitsuba. Microsoft filed
suit against them in _____ for piracy and they went out of business. They
haven’t been proponents of Microsoft, their volumes haven’t warranted direct
account management, and we just began to engage and build a relationship with
them in 2002.
We started to engage with Microtel in the beginning of FY02, but the AM was met
with a closed door and had little if no success. When the Lindows issue broke,
Tom Perrier (tperrier), Microsoft System Builder RSM, discovered that Rich
Hindman was their VP of Sales/Marketing (from Mitsuba). Tom had worked with
Rich prior at AST Computer. Tat got us in the door and Rich is open to work on
the relationship with Microsoft and Tom, but isn’t sharing any information
regarding their plans of volume. This is a summary of his progress with Rich:
1.) Continue the engagement with Rich Hindman to focus on strategies to
differentiate the offerings as Microtel introduces a new wave of SKU’s. This
will separate the offerings and focus on the added value of the Windows based
systems. (Avoid the current situation where the $299 Windows Home SKU is the
same config as Lindows model but $100 more for the same model with XP Home,
with no other differentiation). This can be accomplished with scenarios like
the Office XP 20-Day trial (in place today).
2.) They are still very “non-disclosure” oriented. I tried and tried, but could
not get Rich to divulge any shipment data. I continue to think that the
shipments out of their facility in City of Industry are small. In addition,
Rich would not give me any real data for the current PRM Account Profiling
that we are doing.
3.) All of the conversations with Microtel are centered on growing their
Microsoft business, and improving the relationship between Microtel and
Microsoft. We avoid any direct conversations on Lindows.
4.) Rich realizes and states that Microtel is getting increased focus and
attention based upon their offerings on the Wal-Mart.com site. He will
continue to take advantage of these opportunities as they arise.
5.) In developing the relationship with the local VIA Sales Rep, Roger Goh
(rogergoh), System Builder AM was able to determine that the systems built for
Walmart.com are build somewhere on the east coast, and the volume is approx
1000 a week. He was not able to get the mix.
Tom has been working closely with the taskforce team and David Hoffman on
driving a longer term strategy with Walmart.com. Microtel seems willing to do
Retail relationship efforts have been historically focused on Walmart corporate
and not walmart.com. There is a high level of autonomy at walmart.com. They
are not managed under the same guidelines and processes as Walmart corporate.
They are making their own decisions about product offerings. Luke Ellison is
the Technology Manager at Walmart.com. David Hofman, Microsoft HRD Account
Manager, has developed a relationship with Luke. He is eager to work on some
additional Microsoft programs with David, but isn’t sharing too much regarding
their Linux plans. This a summary of his meetings with Luke:
1.) Luke is concerned that Microsoft is mad at them for selling Linux PCs.
a. He wanted to make sure that we knew that www.wal-mart.com is
b. They feel that customers that purchase Linux PCs were never a “Microsoft”
customer anyway, and that by offering Linux PCs, they were broadening their
c. Their goal with Lindows was to hit a very low price point - if it sold, they
would keep it, if it didn’t they would dump it after 90-120 days. It’s
2.) “Naked PCs” (no O/S) are still outselling Linux PCs (but not by much)
a. They plan to start selling Windows XP OEM (bundled with mouse) as a
standalone product (technically this is legit)
3.) All the machines are build-to-order and that www.wal-mart.com carries no
4.) They are currently working on a way to offer additional software bundles
with all of their PCs (like Office, Anti-Virus, etc.)
5.) He mentioned that Microtel was upset about the E-machines deal with
Wal-Mart retail, but that Wal-Mart didn’t think Microtel could handle being a
retail partner - it was just too big of a job for them.
David is working with Walmart.com to help them promote the Windows XP PCs that
are listed on walmart.com today. In an effort to differentiate the Windows XP
PC from the Linux PC, we are working on a consumer software title bundle to
promote as part of the purchase of the Windows XP machine.
1.) Continue the relationship efforts with Microtel and Walmart.com. (Tom
Perrier & David Hoffman)
2.) Develop a deeper understanding of the Linux efforts at other System
Builders and OEMs in the US. (Datel, ZT Group, MEI etc) (Tom Perrier & Ken
3.) Work with Windows Team to understand options for a Windows XP eval
solution. (Mark Croft)
4.) Stay close to HP and eMachines (to oOEMs selling PCs at Walmart) to
understand their efforts and position in the account.
http://biz.yahoo.com/fo/020821/doesn t do windows 3.html
Wal-Mart Sells Windows-Less Computers
Linux finds fans at Wal-Mart
Sun, Lindows.com Strike Deal
Mandrake on Lindows
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