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Microsoft's OEM Watch List and "Dumbo Plan" (Comes vs. Microsoft - exhibit px04275, as text)

  • Subject: Microsoft's OEM Watch List and "Dumbo Plan" (Comes vs. Microsoft - exhibit px04275, as text)
  • From: Roy Schestowitz <newsgroups@xxxxxxxxxxxxxxx>
  • Date: Sun, 25 Oct 2009 11:25:24 +0000
  • Followup-to: comp.os.linux.advocacy
  • Newsgroups: comp.os.linux.advocacy
  • User-agent: KNode/4.3.1
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Plaintiff's Exhibit
4275
Comes vs Microsoft

September 1992 Status Report
Far East OEM Sales
Jeff Lum, Director

Highlights

FE OEMs suffering export decline as prices in the US drop 
dramatically.  Taiwan is feeling the heat as OEMs struggle 
to stay in business.  Korean OEMs complain that the prices 
they are seeing in the US are below their cost for similar 
configurations.  Japanese OEMs are not in any better shape, 
and in their own market...

Japanese subsidiaries of US OEMs cutting prices 
dramatically.  Apple announced an average 20% cut in the 
prices of its personal computers and Digital announced an 
average 46.5% cut.  IBM will interoduce three new models, 
starting from $1,700.  Compaq announced that it will begin 
selling computers in Japan at prices half the prevailing 
market levels.  The Prolinea line will list for as little as 
$1,100.  But NEC, with 50+% share, announced it has no 
immediate plans to cut prices.  I don't believe that 
attitude will last long.

MS-DOS 5.0a/V slipped into January as compatibility issues 
with IBM DOS/V surface.  No plans to support AX anymore, 
which makes sense.

Win 3.1/V on an aggressive schedule to ship by March.  
Steveb was instrumental in getting NEC to see the light in 
not shipping Win 3.1/V until it is ready.  All key Japanese 
OEMs and US OEMs in Japan have pledged their support to 
preinstall (where feasable) Win 3.1/V when it becomes 
available.

PCMCIA strategy (or lack of) is a major concern for OEMs.  
We have not yet articulated a clear strategy for providing 
PCMCIA support in DOS and Windows.

HP printing technology deal getting closer to reality as the 
general business terms are agreed upon between Maritz, 
Carnahan and Beluzzo.  The agreements consists of $1.5M for 
the user interface and $8M for RBA royalties.  Contract 
terms, schedules, prepayments, and royalties being worked 
out now.

Strong support for W4W in my Solution Providers group from 
HP, NCR, Compaq (all 3 will be at launch), and Unisys (press 
announce only).  Dell and DEC are holdouts.  DEC because 
they are slow and have some technical issues, and Dell 
because they want to be stubborn (Novell may be pitching 
them hard as they are doing with Compaq).

Revenue

[TABLE HERE]


In the FE Japan finished the quarter at $11.1M (116% of 
budget).  We closed several agreements with considerable 
minimum committments which helped get us over budget as 
machine shipments in Q4'92 reached 85% of the same quarter 
last year.  In addition, Karenh's group contributed a lot to 
this by helping complete the agreements with Ricoh and 
Murata for E-FAX.  Korea had a strong quarter finishing at 
$10.1M (194% of budget) due largely in part for delayed 
minimum committment billings from Hyundai, Goldstar, and 
Samsung in the conversion from per processor to per systems 
licensing per Korean government requirements.  Daewoo 
Telecom expected revenue of $1M was delayed to October due 
to MS internal processing.  Taiwan finished the quarter with 
$9.1M (88% of budget).  Acer's revenue hit of just over $1M 
was for PPB usage, and several accounts worth $.5M have 
basically quit business.  CS is confident his revenue will 
turnaround by Q3 as some pending business comes thru and MED 
picks up.  Hong Kong finished Q1 with $1.8M (163% of 
budget).

Markche's Solution Provider Group had a strong September 
finish ($6.9M vs $3.1M, completing Q1 at $26.7M (176% of 
budget).  Dell's min commit on the Office license plus large 
mouse orders accounted for $4M of September revenue.  Dell 
and Compaq accounted for over $10M of the $11.5M surplus for 
Q1.

Tedha's FER Group finished the quarter with $521K (158% of 
budget).  This accomplished in spite of the restructuring of 
our NEC-T Office license which resulted in NEC reaching 12% 
of their $139K budget in Q1.  We will need to focus on new 
opportunities at Hyundai, Sony, VTech, Epson, HP and Compaq 
printer groups to exceed budget for FY'93.

**MICROSOFT SECRET**

HIGHLY CONFIDENTIAL MS-PCA 2613476

1

[pagebreak]

[NEW BUSINESS SIGNED TABLE HERE]

Area Summaries

Japan
As our Modular Windows strategy takes shape, we see more 
consumer electronic OEMs inteested in what we're doing.  We 
need an extra strong focus in this area to gain momentum.  
Recent organizational changes should help this effort; 
ReijiS will be the section lead for Consumer Systems 
products, and he will hire 2AMs this year to focus on 
consumer electronics accounts.

KK engineers and OEM engineers have started to move to MSHQ 
campus for work on NT-J.  The total staffing from OEMs will 
be Fujitsu (3 people), Hitachi (3), OKI (2), Epson (1), DEC 
(1) and Compaq-J (1).

Compaq is forced to purchase IBM's package of Win 3.0 to 
ship with their systems in Japan.  I am working on a 
reasonable proposal to help them absorb some of the extra 
costs of purchasing IBM's product.

Korea
Samsung announced new 486 models at the price of their 386DX 
models and other OEMs will join this price war in the 
domestic market. 
Samsung and HP announced their joint project for PA RISC 
workstation.
Hyundai will announce new 386SX with sound and speakers for 
home and educational markets.
The Electronic Times in Korea headlined Modular Windows as 
next Korean OEM's platform.
CH spreading the word on Modular Windows to Consumer 
Electronics Companies.

News

Compaq - Compaq expands Retail Channel to include Circuit 
City, CompUSA and Office Depot.
Unisys - received a 3-year, $90 mil contract from the Czech 
Savings Bank (Ceska Sporitelna).  Unisys has also received a 
contract from Ferro (Sweden) that could be worth $13 mil.  
The contract is expected to last 5 years.
HP - signed a deal with Samsung Electronics Company Ltd., 
that involves HP's PA-RISC hardware platform.
NEC:  Announced the Select Solutions program which offers 16 
preconfigured systems designed for such areas as desktop 
publishing, CAD and general business.  Released the 
Powermate DX2/66e ($3459) and DX2/66Te ($8049) which are 
based on Intel's latest microprocessor.
HP Printer:  HP announced that it has signed an agreement 
with Colorado Memory Systems (CMS) to acquire the PC tape 
backup company.

**MICROSOFT SECRET**

HIGHLY CONFIDENTIAL MS-PCA 2613477

2

[pagebreak]

Canon Printer: Canon and IBM announced the formation of a 
joint venture to develop next-generation personal computers 
combining PS/2 technology with Canon's bubble-jet printing 
technology.  First product to be covered will be the "Jet 
PC" that Canon developed and showed to us in meetings in 
Tokyo and in Redmond.
Acer: Will introduce a low cost MIPS R/4000 desktop system 
during Comdex.

Issues

NCR - NT - It appears that we released what was determined 
somewhat of a bombshell at the LM Council Meeting.  In order 
for an NT workstation to be added as a desktop to an 
existing network, LM/NT must then become the domain 
controller in order to administrate the NT workstation.  
This eliminates LM for OS/2 and LM for UNIX as being viable 
alternatives for the server OS in a LM environment.  In 
NCR's mind this breaks the "openness" we have been preaching 
about our LM strategy.
Dell - has become increasingly protective of their installed 
base and their desire to maintain control over product 
offerings.  This will have significant impact on new 
business that requires Dell to include registration cards 
and/or changes the royalty model for upgrade business (MS-
DOS 6.0, WFW, etc.) Dell expresses violent concern over 
registration card usage for Anti-virus upgrades in 
conjunction with Central Point Software.
HP is very interested in an MS strategy for allowing CIA 
based machines to be upgraded to Mobile Windows machines. 
Systems has ruled this out for now.  At the very least, we 
need a "family" strategy for these two products.

Key Account Summaries

Japan
Casio (IchiF)
MSHQ, Intel and VLSI had a presentation on PIA to CASIO-
Personal Communication Division.  Hard to know if CASIO is 
interested in this project.  However, they are interested in 
focusing on the very low-end machines.  CASIO will give us 
their questions in the middle of October.  CASIO will reply 
to MS after internal discussion is done including the 
president in 2 or 3 weeks.

Epson (HideyaU)
Negotiation in progress for royalties for MS-DOS and 
Windows.  Epson has enjoyed gut low prices ($10) for years.  
We are negotiating to get them closer to guideline.  We 
offered two types of proposal listed below:
a) $10 until 4/1/93. then $15 until 10/1/93, then it goes to 
$17.
b) $11 until 4/1/93, then $13 until 10/1/93, then $15 until 
4/1/94, then it goes to $17.
Regarding the MS-DOS 6.0 US version royalty (incl util), $18 
until 10/1/93, then it goes to $22.  Any other localized 
version should be added at $2 as a localized version fee.

Fujitsu (KenjiN)
They are developing a middle class laser printer that is 
capable of 16ppm.  Target sales are 20K units per year, 
including OEM.  Shipping will start early next year.  They 
started shipping their new highest-end desktop type of PC, 
which utilizes 486DX2 66MHz.  However, the price is more 
than US$17,000 which is much too expensive compared with one 
that is manufactured in US or Taiwan.

Kanematsu (IchiF)
Omron Issue:  Kanematsu failed to get Omron deal.  Kanematsu 
did not understand Omron's needs: i) Interlink, and ii) 
Kanji Version support with inexpensive way.  Kanematsu asked 
48K development fee for FEP (Kana-to-Kanji conversion 
software), which Omron cannot afford.

Comparison Sheet:	ASCII (DR-DOS)		
Kanematsu (MS-DOS ROM V3.22)
1. DOS feature		120 yen			
360 yen
2. FEP			n/a			
300 yen***---> 0 yen
3. NRC / Develop.	40 yen			240 
yen ***---> help plan
4. BIOS /KB Driver	about the same		
about the same
5. ROM /RAM		about the same		
about the same (80 yen)
Status
1 MS's offer to Kanematsu was:
i) to license MS's FEP for free of charge. and
ii) help in development fee for Kanematsu by giving 
commission of WORKS-Kanji offering to Omron together.

**MICROSOFT SECRET**

HIGHLY CONFIDENTIAL MS-PCA 2613478

3

[pagebreak]

2 However Omron just wants an inexpensive solution and 
interlink for Kanji version, Works.
3 Omron does not understand why MS is good and valuable.
4 If Omron selects DR, MS cannot guarantee that Works will 
work properly.  This has to be told to Omron.

Matsushita Electric (MEI) (Kenjin)
They decided to pre-install both MS-DOS 5.0a/V and Windows 
3.1J starting next Spring, but the exact date depends on Win 
3.1J.  Target market is just Japan.  We have to think of a 
remedy plan for their large remaining PPB.  The estimated 
PPB at the end of their current agreement is approx. $1.6M, 
which originally came from their OS/2 agreement (M/C: 
$1.5M).  In order to make all of the remaining PPB available 
to their new agreement, Mr. Matsuda of MEI has signed an LOI 
stating "Matsushita is now shifting its sales power and 
software development resources from MS-DOS to Windows 
systems.  Now planning to preinstall MS-DOS and Windows on 
the PCs that utilizes 80386 or 80486.  The preinstalled 
ratio of current plan is more than 50% of all the PCs 
marketed in Japan at the end of 1993".  Now, we need to 
conclude as soon as possible.

Minolta (IchiF)
Amendment to TrueImage Agreement:  Minolta requested to 
reduce their royalty down to $10/sys - $15/sys range after 
digesting (consuming) 10K units of their commitment $270K.  
Advanced M/C payment is also hard for Minolta, they say, 
because PostScript Level1 and its clone in the market have 
declined.  New royalty of $25/sys is offered with M/C of 
$75K.  Additional option is to reduce the rate from $25/sys 
to $15/sys, but keep the M/C at $150K, with 10K unit 
commitment needed.
Dumbo Opportunity:  Dumbo Plan was presented to Minolta, who 
is interested in this project and will have a presentation 
to MSKK to prove that they can do mass-production.

Mitsubishi Electric (MELCO) (ToshimiH)
Had a ROM-DOS meeting with JonK after the ROM-DOS Seminar 
held on 9/10 and further discussed in more detail ROM-DOS, 
FFS and MS-DOS v6.0.  Especially for FFS which is licensed, 
very aggressive discussion was made for their future 
products using it.  They have announced 2 types of highend 
Apricot series.  One is a server model (i486DX2 66MHz/SCSI-2 
2GB HDD, 10GB at max/16MB memory, 64MB at max) for more than 
50 clients.  They expect to sell 2,500 unit/year, starting 
in this Nov.  The other is DOS/V Apricot Notebook PC 
(i386SL/25MHZ/VGA) and they expect to sell 20,000 unit/year, 
starting this Dec.

NEC (KiyoO)
NEC visited HQ and Tandy to investigate VIS, Multimedia, 
Modular Windows, advanced products and MS' future strategy.  
Before the meeting, NEC visited Tandy on 9/8 and learned 
about VIS hardware.  NEC's impression of the meeting is that 
Tandy already announced their new PC ("Sensation") with 
multimedia features, at low cost and high function, for the 
business market. That's why Tandy is focused on selling VIS 
into the home market.  Tandy couldn't understand NEC's plan 
to launch PC-9800 with VIS into multimedia market by taking 
advantage of huge install base of PC-9800, sales and support 
power and NEC's brand image.  We need to communicate with 
nEC and Tandy to launch a sort of VIS into the Japanese 
market.

NEC committed to using Modular Windows even though they 
don't have a concrete plan yet.  We need to sell Modular 
Windows to each division that currently manufactures 
consumer electronic devices.  For Modular Windows, they 
think we are too focused on TV-based devices.  I think we 
can sell Video for Windows, Clockwork that is a product 
coming soon.  In other words, at least participants seem to 
persist in current situation, i.e. they seem to prefer a 
standard that is defines by a committee to DeFacto Standard, 
they think it's very hard to establish information hierarchy 
for digital communication world, they are not sure if end 
users can recognize value of digital world or not.  As Robg 
asked, we need to get their feedback, which means how NEC 
executives think about our vision and product plan and we 
need to continuously discuss our vision and future products 
with NEC.  I think this meeting was a good beginning to work 
with not only the NEC PC division but, also other divisions.  
They went away with a lot of info and had a lot of studying 
to do.  We need to sell I-FAX and Homer to appropriate 
divisions as well.

SamF and MarkAn met with Mr. Mizuno (CEO & VP, responsible 
for domestic sales) and others and gave them a demo of VIS 
and AVI.  He is not directly responsible for their product 
plan, but has power to direct NEC's direction.  The demos 
went pretty well, although it was difficult to gauge his 
response.  Such activity helps us to persuade PC Div. to use 
our products.  He was surprised to learn the number of 
titles being developed for the VIS and MPC, and wanted to 
know which titles and tools were available, and if any 
Japanese titles were being developed.  He seemed to think 
that the VIS was an interesting lowend machine that NEC Home 
Electronics should look at.  Mr. Mizuno is one of the guys 
Apple and IBM have been pitching.  He seems most interested 
in teleconferencing and not much on consumer technology or 
lowerend PC stuff.  He said that Japan was currently 
installing more teleconferencing systems than any other 
country.  Since these systems require a lot of dedicated 
space and hardware, the idea of being able to teleconference 
directly from

**MICROSOFT SECRET**

HIGHLY CONFIDENTIAL MS-PCA 2613479

4

[pagebreak]

your PC is very compelling.  He wanted to know if MS was 
working in this area, or if we had opinions on the hardware 
being developed.  Mizuno said they were very interested in 
ISDN-based systems.  This is going to be a big focus for 
NEC.  He didn't mention Kaleida, but NEC clearly has a fear 
and respect of Apple.  He commented that Apple would have a 
much larger installed base if they only licensed software 
and didn't make hardware. (He asked if MS had any plans to 
get into the hardware business.)  Impression of MarkAn is 
that they don't understand how it relates to their 
mainstream business.  that's why it's more important than 
ever that we keep them up to date on our technology and keep 
feeding them advice about where to take their platform.

NTT Data (ShigeruN)
Automobile Registration Project
NTTD revealed their plan to use NT for new project; nation 
wide project with government, that is a Car registration 
program.  They also told us that they officially decided to 
adapt Windows NT as official OS of NTTD's corporate 
strategy.

Sharp (IchiF)
VIS/Modular Windows: MSKK (MarkAn) and A&A (Tandy-J) had a 
presentation regarding VIS and Modular Windows to Sharp-
Corporate Research and Development Group including 
Multimedia Systems Research and Development Center.  VIS 
offered by A&A is one of the good approaches to open up a 
new channel between MS and OEM to promote multimedia related 
Product.

WinPad:  RP has decided to participate in the PIA Project.  
Mr. Tsuji, President, sent a letter to Mr. Andy Grove, CEC 
of Intel.  MS offered Haiku, Rover and WinPad to Sharp, so 
we need to develop a clear vision on the OS plan for PIA.

Toshiba (ShigeruN)
Windows Pre Install to HDD/RTR:  Held meeting and agreed 
with Toshiba's idea to preinstall Windows 3.0A Kanji on HDD 
for the Japanese market.  Toshiba plans to ship it as soon 
as possible.  Current plan is as follows:
- - PC with HD ship (RTR)
 + Windows royalty is $22 and regular "MS-DOS" royalties on 
the HDD
 + Upgrade from 3.0A to 3.1: will be no royalty from Toshiba 
to MS
- - HD units standalone for endusers who bought a PC already
 + in HDD, Windows and MS-DOS will be installed (Toshiba 
specific)
 + MS-DOS will be free royalties, because Toshiba already 
pays for it for all the systems they ship
 + Windows royalty is $12, and upgrade from 3.0A to 3.1 is 
$10
 + Toshiba puts in registration card and will share the 
database with MS
 + Toshiba also puts a notice for availability of discount 
upgrade for all the registered users
 + Toshiba will upgrade all the registered users, and will 
report to MS the number

Korea

Daewoo Telecom (DWT) (SIKim)
Three agreements including a new two year agreement for 
system softwares with an annual $3.75M M/C were signed by 
DWT and are under MS internal processing.  The agreements 
includes MS-DOS, Windows, NT, and Works for MS-DOS and 
Windows.  We got their verbal commitment for WFW from C.M. 
Kim of DWT and Steve Eleia of LE.  The deal was initiated by 
DWT.  Leading Edge is considering Windows Sound System and 
Video for Windows.  DWT plans to develop a new FAX machine 
which will connect to PCs on the network.  Modular Windows 
for FAX was introduced.  Their R&D Team completed the 
testing of Hangeul DR-DOS 6, but the DR-DOS issue has 
disappeared inside DWT with signing of these new agreements.

Goldstar Co. Ltd. (GS) (CHCho)
With our presentation for MS Modular Windows, the staffs of 
Planning, R&D, Sales and Marketing departments from Consumer 
Products and computer divisions gathered to discuss their 
product strategy to adopt Modular Windows.  GS especially 
showed strong interest in the Tandy VIS system.  GS plans to 
consider VIS system as their next strategic project.  Tandy 
will visit GS to discuss this issue in October.

Hyundai Electronics (HEI) DJChoi)
HEI reorganized and the new GM, Moon-Kyung Kim, will take 
charge of the computer division.  This reorganization will 
not affect the overseas business.  HEI decided to assign Ed 
Thomas of HEA to sign the MS license agreement for HEA's 
effective decision making in US market.  This assignment 
will be effective until '93 and dependent on their overseas 
marketing strategy.  Hyundai has tried to participate in 
consumer electronics products for a long time and we are 
persuading them to initiate their product plans with Modular 
Windows.  They announced two 386SL notebook models

**MICROSOFT SECRET**

HIGHLY CONFIDENTIAL MS-PCA 2613480

5

[pagebreak]

supporting PCMCIA which will be shipped to HEA and domestic 
markets.  Another 486 machine at competitive prices will be 
announced in October.

Samsung Electronics (SEC) (JoonP)
PC business has been decreasing, especially in their 
overseas shipment, and their PPB is more than $3M and will 
increase.  After executing Amendment #2 in October, they 
will request another PPB reduction plan.  SEC executed an 
agreement with IBM to ship 486 machines, MS-DOS and Windows 
in ROM, based on IBM's specification.  The first shipment is 
anticipated in March '93.  SEC forecasts 300K in 1993.  
Their R&D team has started designing the machines with MS 
OAKs.  SEC Multimedia TFT drafted the first specification of 
Tandy VIS compatible machine.  The spec was sent to Redmond 
Multimedia group for their reference.  For the domestic 
market, SEC announced the aggressive price of 486SX models.  
W1,7000,000 including VGA color monitor.  This announcement 
will result in a new price competition and have an overall 
impact on the domestic PC market.  Samsung and HP officially 
announced their joint project PA RISC workstation.

Trigem Computer (TG) (SIKim)
All terms and conditions of Amendment #1 were agreed to, and 
the agreement is under MS legal group's review.  Trigem 
cancelled their 386 Home PC for the domestic market and will 
launch new models for the business market.  they begin to 
ship WinWorks to Computer Technology.
Jin-Koo Seo, Executive Director of R&D Division, was named 
to take charge of the licensing issues.  He became their new 
counterpart for MS agreements.  Their Chairman, Y.T. Lee, 
will make a presentation for the strategy for Korean PC 
industries as a representative of the Korea Information 
System Industry Association to Korea President, Noh Tae-Woo, 
at the presidential office on October 28th.

Taiwan

Acer (PWong)
We have concluded the 10K/year NT license and 25K/year 
Windows for Workgroups license with Acer.  we also arrange 
for Tim Dunley, Product Manager of Modular Windows, to visit 
Acer.

Autocomputer (EddieW)
MED Agreement will be signed within two months, and starts 
to ship from Jan 1 1993.
To ensure "standalone sales" are being kept to a minimum 
between now and Jan 1st 1993, we have informed AUVA to take 
solid actions immediately.
1 Sending a warning letter to all of its channels and 
distributors to emphasize that standalone sales seriously 
violates the agreement between MS and AVUA.
2 To put warning letter on P.O., Shipping Document and 
Documentation.

Copam (RLee)
Copam used to ship the computer system with 90%+ by using 
their own brand with Europe as their major market, but now 
their strategy is changed, and in order to gain the profit 
and lower the cost, they now want to also try OEM business.  
At the same time, they feel that taking the motherboard 
business is another way to get money.

DTK (RLee)
Starting 10/92, DTK will pre-install Windows into the HDD 
with the computer system.  They will also include a MS 
registration card in the package.  Starting with Windows, 
they have worked with RR Donnelley to get manuals and 
diskettes and we hope this is a good first step.  DTK is 
happy to work with them, but they suggested more flexibility 
provided by RRD would be better, such as setting up a 
warehouse in Taipei, etc.

Lyi-Cheng (MaxKang)
We had a final discussion with the Chairman of the Board and 
Finance Manager of Lyi-Cheng and they fully understand their 
responsibilities to reschedule the payment due to Microsoft 
before further action is taken.  (Note:  We have audited 
their books and awaiting final reports).

Personal Computer Upgrade (PCU) (Eddiew)
MED program will be implemented in the near future.  they 
signed two new OEM customers, which are GEOS Data System 
(H.K.) LTD and Hrisak Wolfgang Ges.M.B.H.

Plus & Plus (EddieW)

**MICROSOFT SECRET**

HIGHLY CONFIDENTIAL MS-PCA 2613481

6

[pagebreak]

Plus & Plus (EddieW)
The account has filed chapter 11, and legal proceeding is in 
process.

Twinhead (MazKang)
Trying to sell them pc-works for sub-notebook, they also 
show great interest in Microsoft Multimedia products and 
it's good for both MS and Twinhead for a new business 
opportunity.

Hong Kong/PRC (SYang)

Ocean
New customer.  Was the largest DRI customer in Hong Kong.  
They are planning to ship in late October and we are helping 
them gear up all their products so they are a healthy 
company with strong sales in the coming year.

UO
New customer.  This company was founded by two gentlemen who 
were working at Ocean.  They were very aggressive in the 
European market.  we are negotiating a WinWorks contract 
with them, and expect to close this deal by the end of 
October.

Video Technology (VTC)
They are increasing sales volume worldwide and Bosco Ho 
plans to negotiate a new deal in Windows.  All future 
machines manufactured from VTech will bundle MS-DOS and 
Windows.  The discussion of Windows for Workgroup is also in 
the process.  we expect them to sign the contract early next 
month.  In the meantime, Bosco had planned to travel to the 
US to visit JoachimK and JeffL in Redmond to build a strong 
relationship for both companies.  Their major concern in the 
US is trying to push out their multi-processor machines in 
the market early next year, but their engineer will need 
more technical support on Windows NT.  They are also being 
aggressive in the PRC market.  They are planning to build a 
channel in PRC to sell software, which is the Chinese input 
method.

US OEMs

AT&T (MarkBu)
Although we were led to believe last month that the Telepen 
project was going to General Magic this does not appear to 
be the whole truth.  It is true that GM will be involved 
with Magic Mail but PenPoint does appear to have the design 
win here.  Karen Hargrove *has not been* very helpful in 
providing OEM with details of her meetings with AT&T.  The 
political nature of the DSP/VCOS business has escalated to 
the point of Tom Sarazen being fired over his role in 
working with MS.  I have asked AT&T to provide me with a 
clear statement of direction in how they would like to 
continue this relationship with MS.  Once reviewed we can 
set some more concrete steps with the AT&T MM group.

Compaq (MarkBa)
During the month of September we focused our energies in two 
areas.  the first was the continued work on the joint 
development projects for CIA, Plug and Play and Pen 
computing.  Secondly, we have been working on repositioning 
Compaq as a more strategic business partner, specifically as 
it relates to NT and WFW.  There has also been a great deal 
of effort in the preparation of Compaq'a role in the WFW 
Launch Event in New York.  Compaq's unit production and 
sales continue to increase and they are forecasting 
approximately 250,000 systems per month for the rest of the 
calendar year.

Dell Computer (CarlG)
Dell continues to reject our WFW proposals on the basis that 
our offer is a financial mis-fit with their "Build-to-order" 
marketing model and our per copy pricing is too high.  
Executive discussion between JoachimK and Joel Kocher 
yielded no progress.  DELL is fully aware of our 
announcement and launch events.  Progress was made 
developing a high level of interest in FOGHORN.  LOI and 
signed Amendment expected in early October.  DELL revealed 
plans to announce a Video System in Q2 CY93.  DELL's plans 
to offer their OEM Office Bundle to the installed base has 
been halted.  Microsoft participated in DELL's first release 
of DELLWare with two full page advertisements, one from 
Excel and one from WinWord.  CarlG has prepared a Sr. 
Partner Marketing Plan and obtained necessary approvals to 
engage DELL in the plan mid-semester.  In exchange for Sr. 
Partner Funds, MS is negotiating for one guaranteed page per 
issue, content for which to be controlled by the MS account 
manager.  If negotiations are successful, expect to see WFW 
and several MM Titles in the Nov-Dec issue and a feature on 
Access in the Jan issue.

**MICROSOFT SECRET**

HIGHLY CONFIDENTIAL MS-PCA 2613482

7

[pagebreak]

Digital Equipment Corp (GregAn)
The Open LAN Manager Conference, OEM Briefing and associated 
meetings with five Digital visitors the week of September 
21st consumed 25% of my time this month.  All in a good, 
productive week.  Other activities for the month included 
finally being able to send a WFW pricing proposal to the DEC 
PC Group, preparing a Multimedia pricing proposal to for 
Bookshelf, MM Works, Word/Bookshelf bundle, MM Windows and 
MSCDEX, organized an MS/DEC meeting re wireless issues and 
opportunities.  Also spent a fair amount of time laying the 
groundwork for the next round of executive meetings in 
October.

Hewlett Packard (DarcyH)
PPG - Continuing to proceed on defining mutually interesting 
patent portfolios for exchange in a cross-patent license.  
Defining this with HP/MS Attorneys and HP VP Bob 
Frankenberg.
HP Corvallis - Delivered a proposal for Pendragon, and are 
coordinating meetings with HP Bristol for the Penlizard 
investigation.  HP has decided to initially release a 
Pendragon and "Small Pendragon" that will provide a lower 
end entry into the market.  We are discussing this strategy 
in a meeting in early October, and are also pushing for the 
Mobile Windows design win for this system.
HP Grenoble - HP has signed a license for Sparta!  They will 
initially commit to 25K/yr at $8 per system.  HP will also 
increase their Windows commitment to 150K/yr.  We had one 
meeting on the Pike project which is a desk-slate machine 
that will allow users to send and annotate faxes over same 
line as their phone.  we have a meeting schuled with KarenH 
for IFAX and the MOD-Win guys in early October to 
investigate best OS for this platform.  Grenoble has also 
asked for quotes on mice for 100-150K/yr.  DarcyH working 
with DavePru to provide.
HP Sunnyvale - HP Sunnyvale has absorbed the Network Server 
Division.  As result, they are still finalizing a re-org, 
and have asked to postpone a meeting on NT until mid-
October.  The TVA project has been moved from Sunnyvale to 
the Personal Software Division (formerly the New Wave 
division, under Webb McKinney).  DarcyH is working to set up 
a meeting with Webb to discuss strategy.  In the interim, we 
are continuing to work with the TVA project group.  HP 
claims we have a superior ISV and service provide strategy, 
but is still determining if Haiku is best OS strategy.  HP 
is working to make a decision with TVA by early October.  
For licensing, at this time we are very far apart, and are 
postponing any further discussions until HP gives clear 
signals they want Haiku.
Personal Software Division - We are working on a strategy 
for cooperation on HP Openview and Hermes.  HP has expressed 
an interest in a publicly stated commitment for cooperation.  
MS is interested, and DarcyH is working to set up meeting 
for business discussions.
HP Colorado Networks Division (CND)/Information Networks 
Division (IND)
We are in the final stages of an NT source license.  HP has 
verbally stated a desire to move towards a more aggressive 
commitment to NT on PA.  DarcyH is working to set an 
executive meeting with PaulMa to discuss terms of such an 
agreement.

Insignia (PeteP)
Insignia has now withdrawn their application stating an 
intent to use "SoftWindows" as a trademark.  This means the 
amendment draft to add Windows to their agreement and 
license them to deliver a product based on SoftPC with 
Windows can be resubmitted in October.  I expect that 
Insignia will avoid pending price increases and sign this 
amendment in October even though their product won't be 
available until January, 1993.  Insignia was represented at 
the OEM briefing by a product marketing manager from the UK.

NCR (MarkBu)
There are two significant events in September with NCR.  The 
first was the Executive Review on Sept. 16 and the second 
was for MS to gain an understanding of NCR's architectural 
and systems strategy.  Key to gaining corporate commitment 
to NT will be the feasibility of porting NT to the high end 
loosely coupled systems in NCR's 3600 and 3700 line.  We 
will be pursuing this opportunity over the next couple of 
months.  Additional areas of interest were in Object 
Management and development of Multimedia capabilities over 
the network.  With the Windows Amendment now finally signed 
NCR has committed to a minimum of 100K Windows units per 
year.  This increases NCR's committment by 4.4M over the 
next two years, the first time NCR has been willing to step 
up to additional minimums since the OS/2 problems from a 
year ago.  The MS-Mail license with StarGroup continues to 
be a trouble spot and is still not resolved.  The problems 
stem from NCR's concern that with the release of the DOS 
client in MS-DOS 6 and the Windows Mail client in Windows 
for Workgroups, NCR's potential market will be drastically 
reduced and they will be unable to meet their minimum 
obligations.  there is still pressure to complete this 
license but it may be for a significantly reduced Minimum 
Commitment.  A follow-up meeting with the NCR Dundee was 
held in Scotland with Bill Anderson, John Hall and David 
McBride attending.  This was a very productive and 
successful meeting with NCR agreeing to show

**MICROSOFT SECRET**

HIGHLY CONFIDENTIAL MS-PCA 2613483

8

[pagebreak]

NT on an ATM and the next big banking show in Europe.  Jim 
Adamson attended the majority of the meeting and has given 
his blessing to move forward with the NT investigation.  As 
mentioned before Adamson controls the Financial end of NCR's 
business and support from him for NT would have dramatic 
impact throughout Financial and Retail.  We also met with 
both Safari and Clemson to discuss Pen opportunities.  It 
appears all but a high end notepad has been killed in 
Clemson due to lack of market acceptance for the 3125.  This 
puts on hold all smaller form factors.  The only thing that 
could change this is if there is a large market opportunity 
for a small form factor the 3115 could be revived. NCR also 
attended the LM Council meeting and was very disturbed at 
some of the architectural decisions we have made with NT. 
(See issues)

Unisys (PeteP)
An amendment raft will be delivered in October involving 
WFW, Windows NT, registration cards in shipments of all MS 
products, and other important, housekeeping things.  We have 
reached tentative agreement that certain network cards will 
be shipped on a "per-system" basis with WFW as an element of 
the system accessory kit which includes keyboard, mouse, 
operating system, etc.  They are eager to hear details about 
the strategic integrator program which we should be ready to 
present later in October.  Unisys plans to begin pre-
installing all their systems on a worldwide basis in 4-5 
months, to coincide with the release and availability of 
their new network ready systems next year.  They are also 
interested in licensing C7 sources for portation to their 
CTOS platform and as the compatibility story between 
platforms. This is important because of the nutual work 
being done on WOSA specifications for the financial industry 
and commitments Unisys has made to support our architecture.

AT&T/NCR Projects (TomDa)
Currently, KarenH of ATDB is acting as the interface with 
AT&T on the Telepen Project.  This is currently not an 
active project for OEM as this project is being driven by 
the Strider Group with the direct involvement of BillG.  
Billand of USFG met with the NCR ATM group in Dundee 
Scotland on 9/15 to discuss the ATM project.  The AT&T 
Safari group has set out to design and build a convertable 
machine.  The objective of the Safari Project is to achieve 
a Mobile Windows design win.  This past month MarkBu and 
TomDa met with the Safari group and a group from NCR Clemson 
(the NCR 3125 group).  We discussed NCR product plans, 
Mobile Windows, CIA, etc.  TomDa and MarkBu plan a follow on 
meeting with the Safari group in Somerset, NJ this month.  
NCR is very interested in a protect mode OS for the POS 
Project.  MS-DOS 7.0 was a candidate for NCR's POS (Point of 
Sale) machines but this product has now been delayed.  
MarkBu and TomDa are tentatively scheduled to meet with the 
NCR POS group in Atlanta later this month to discuss NCR's 
POS requirements and to explore alternatives.

Compaq Projects
Convertable Project - Compaq is planning to ship a 
convertable machine in the mid '93 timeframe.  we are 
working with Compaq to get their feedback on Mobile Windows, 
however Mobile Windows is not scheduled to ship until 
September '93.  Compaq has provided some details on their 
convertable plans.  Compaq has agreed to review the Mobile 
Windows spec but a follow on meeting is needed.  The 
objective of this meeting should be to get Compaq's support 
and commitment to Mobile Windows upon the shipment of this 
product.

CIA Project - Compaq's plans are very much in the formative 
stages.  Compaq has requested that we meet to discuss 
Intel/VLSI issues.  This meeting has not yet been confirmed.

Plug and Play Project - Weekly conference calls have been 
ongoing with CarlS, TomLe, TomDa and Compaq to discuss the . 
Compaq intends to ship systems in Q293 and would like these 
systems to take advantage of the Win 3.1 Plug and Play 
enhancements.  MS Systems is not clear on Compaq's 
requirements for these enhancements.  Systems would also 
prefer to remain focused on Chicago.  Compaq has committed 
to provide MS with a letter clearly documenting their 
requirements.
HP Projects - This last month we provided a response to HP's 
RFP for Pendragon.  In this response we specified Mobile 
Windows.
Pen Dragon Project - LuisT, DarcyH and TomDa are scheduled 
to meet with HP this week to discuss this RFP response.  The 
object of the meeting is to discuss and resolve any 
outstanding issues concerning this response.  We will also 
discuss the software suite for Mobile Windows, handwriting 
recognition, etc.
Pen Lizard Project - ByronB LloydFr, TomDa and DarcyH are 
scheduled to meet with HP this week to discuss.  The 
objective of the meeting is to discuss and influence HP's 
PDA plans.  A follow on meeting with the CIA group is also 
planned with HP in Bristol England.  The Bristol R&D group 
is currently conducting the investigation of HP's CIA 
project.

**MICROSOFT SECRET**

HIGHLY CONFIDENTIAL MS-PCA 2613484

9

[pagebreak] 

FER OEMs

Acer America (PeteM)
- - Commit to develop a multimedia player based on Modular 
Windows.  Acer America completed the cost and feasibility 
analysis.  The project has been turned over to the Acer, 
Inc. in Taiwan.
- - In addition to Intel based high-end multiprocessor servers 
that support Windows NT, Acer will also introduce low cost 
NT desktop based on MIPS processor.
- - Acer is interested in considering a new software bundle as 
a follow-on or replacement for Power-to-Choose application 
bundle.

Fujitsu (SteveMc)
Executive Review with Fujitsu J top engineering contacts was 
held after OEM Briefing.  Sadao Fukatsu, Director of 
Software Engineering at FPS, attended.  He may become main 
OEM contact for Fujitsu in the US regarding the MS Systems 
platform evangelization.  Near term objective is to 
influence FPS to implement the MS DOS 5 and Win 3.1 platform 
on their portable (old Poqet brand) PC line.

Hyundai America (TomBru)
Hyundai America is announcing a new line of PCs which will 
be RTR Windows machines.  TomBru worked with Systems 
Marketing to provide a quote from one of MS's Vice 
Presidents giving a favorable opinion of Hyundai's decision 
to participate in MS's RTR program.  JoonP stated that 
Hyundai Electronics will sign a letter authorizing Ed Thomas 
as the agent for Hyundai to sign agreements between MS and 
Hyundai.

NEC Technology (SteveMc)
Due to a late start, and confusion regarding the Select 
Solutions program distribution strategy (i.e. first product 
delivered to market end of August, catalogs targeted at 
direct sales channel yet to go out), it appears that this 
effort is in deep trouble already.  Process to extend the 
Office agreement for an additional six months, including 
reduced commitment and higher royalty pricing, is now 
underway.  New "Ready" line of entry level PCs, targeted for 
distribution through mass merchants, started shipping end of 
September.  NECT's strategy, of offering "high end" easy to 
use PCs ro end users through mass merchants, appears to have 
little chance of succeeding!  To-date they have not 
established a wide distribution channel (i.e. only Lechmere 
and Brandsmart, regional resellers, have agreed to carry the 
product line).  Also, it is not clear that end users will 
pay the premium price that NECT is offering for an entry 
level PC (i.e. "home office" type).  Discussions with high 
level contacts leads SteveMc to believe that there is a 
growing sense of frustration at Boxborough related to their 
lack of success to-date in growing their PC business (i.e. 
lack of coherent direction, little communication and poor 
execution)!  Monitor and CD-ROM business remains healthy.

Toshiba America (TomBru)
Tpm Scott, VP of Sales, explained how TAI's sales 
organization is set up.  Tom Scott committed to get Greg 
Cegan, in charge of bids within TAI Sales, in touch with 
TomBru to look at the number of Requests for Proposal that 
include Windows as a necessary requirement in the proposal.  
- From this data, TomBru will be able to quantify the 
op[portunities that TAI is missing by not shipping Windows.  
This information will be presented to Steve Lair, VP of 
Marketing, at TAI in the future.  TomBru also worked with 
the Windows for Pen Group (Mobile Windows) to help TAI begin 
writing their Pen Driver for the upcoming Tablet which will 
show at Comdex.  This driver should be finished by TAI by 
the end of October.

Printer Business (RichAb)
- - HP - We had a successful meeting between Maritz, Carnahan, 
and Belluzzo, where they agreed upon the essential business 
terms for a printing technology deal.  The agreement 
consists of two parts: $1.5 million for the user interface 
and $8 million for RBA royalties to accrue in 1994.  $3 
million of the RBA royalty will be non-refundable and 
prepaid in 1993.  There remains significant work to conclude 
a contract covering this arrangement.  Key items to be 
worked out in early October are the unit royalty schedules 
for ink jet and laser printers and the project milestones in 
1993 to which the $3 million pre payment will be tied to.  
Since exact deliverables cannot be well defined for the RBA 
portion of the agreement, a process must be defined by which 
both companies work toward closure on specific 
implementations.

- - Compaq - productive meeting was held in Houston where we 
demonstrated and briefed the Compaq printing marketing and 
engineering team on our technology.  We had preliminary 
business discussions as well.  Compaq is giving us every 
indication that they will buy our technology for use in both 
laser and ink jet products.

**MICROSOFT SECRET**

HIGHLY CONFIDENTIAL MS-PCA 2613485

10

[pagebreak] 

- - Canon - A meeting was held with Kadokura of Canon to 
discus the deadlock we have on NDA.  Kadokura agreed to go 
to Canon corporate legal with Mr. Adachi of CIS assistance 
to get approval on our agreement.  the sticking point 
continues to be Canon's "...reduced to writing..." 
requirement of confidential information.
- - HP - A conference call was held between Doug McChord of HP 
- - GHC and Adam Bosworth where HP shared their thoughts on an 
"electronic briefcase" personal image database product.  HP 
wanted to gauge our interest in such an application, one 
they see as potentially creating demand for their scanner 
products.

**MICROSOFT SECRET**

HIGHLY CONFIDENTIAL MS-PCA 2613486

11
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