EditorsAbout the SiteComes vs. MicrosoftUsing This Web SiteSite ArchivesCredibility IndexOOXMLOpenDocumentPatentsNovellNews DigestSite NewsRSS

01.14.09

Microsoft Chief: “Under NO Circumstances Lose Against Linux”

Posted in Antitrust, Bill Gates, Finance, GNU/Linux, Microsoft, Steve Ballmer, Windows at 11:35 am by Dr. Roy Schestowitz

Maze
Using money to starve and entrap competitors

IN THIS SERIES of posts we have already covered relevant antitrust material such as

Today we look at Exhibit px08562 [PDF] from Comes vs Microsoft. It’s about EDGI and it covers schools in developing countries. The exhibit comprises bits of internal correspondence at Microsoft and it involves high-level figures such as Steve Ballmer, Jeff Raikes, Jim Allchin, Chris Jones and one of the main men behind this anti-GNU/Linux push, Orlando Ayala.

he exhibit opens with the revelation that Steve Ballmer is (“steveb” in the E-mails) opposed to limits on dumping against GNU/Linux. To quote:

We went in to the BPR with $30MM in mind, but steveb said we shouldn’t cap it, since it’s “net accretive” to the P&L, ie if the field handles it correctly, it’s revenue that we wouldn’t have seen otherwise (ie if we lost to Linux), so even if we make only a few bucks per PC, it’s better than zero, plus we have the oppty to sell addl non-bootable sw into the customer.

Later we find Geri Elliott, who is a Microsoft employee with a hat in government — one that was (mis)used to cross out Free software from education.

Even before EDGI is formalised, says Microsoft’s Orlando Ayala:

Effective immediately, we are significantly enhancing empowerment by the GM to provide services and, where necessary, even dollars back to the customer to offset the cost of buying new OEM PC’s with *legal* Windows preinstalled instead of naked PC’s with Linux and/or other low-cost/no-cost software.

Offering “dollars back to the customer” is this case is what some people would label a bribe. It’s about suffocating the competition, never allowing it to exist or grow. This is done through negative pricing on the face of it (it pays off to Microsoft in the long term).

The “example scenario” Microsoft mentions:

The government of “X” is advocating using open source for all government-funded computers in order to keep “X” dollars inside the country and save the taxpayers millions of dollars. They are therefore looking at rolling out 50,000 PC’s with Linux to all their K-12 schools and run StarOffice for free or a locally-produced package that they can purchase for $5/desktop.

The planned solution:

In order to compete more effectively against Linux and other providers on these deals, we can now leverage the Education and Government Incentive [EDGI] program to help tip the scales to MS in the deal. After engaging the regional team. the region may use funds to provide services and/or rebates to the customer with the following limitation:
Not to exceed the estimated Windows royalties recognized by MS from the OEM selling the PC’s to the customer (in the example, 50,000 PC’s at approx. $100/PC for OEM Windows XP Professional would result in a maximum of $5M for the individual deal).

Initially (2002), this is targeted at:

LATAM, Africa, Middle East, South Asia including India and PRC.

It is important to emphasise that this is not the case of Microsoft adjusting its prices to compete more effectively. It’s a proper dumping (predatory pricing) tactic that specifically targets any gain made by the competition and this is done by a corporation convicted of monopoly abuse*. In bold font face it states:

It is essential, therefore, that we use this in only in deals we would lose otherwise.

General Magagers are referred to CompHot again:

Escalate to the “comphot’” alias…

CompHot, according to Microsoft, targets "Linux infestations". CompHot is a cryptic code word that would be too alien to outsiders. We mentioned it yesterday as well.

David Driftmier is responsible for EdSG, which conducts many of these anti-GNU/Linux operations, but the idea comes from higher above, notably Orlando Ayala, Bill Gates, and Steve Ballmer, based on other related correspondence. Pat Fox is in this loop as well.

Here is the punch lines from Orlando Ayala:

Bottom line do our best to show the great value of our software to these customers and ensure we get opaid for it under NO circumstances lose against Linux before ensuring we have used this program actively and in a smart way.

Yes, Microsoft is not worried about “Linux”. Not at all.

“[If I ask you who is Microsoft's biggest competitor now, who would it be?] Open…Linux. I don’t want to say open source. Linux, certainly have to go with that.”

Steve Ballmer (Microsoft’s CEO), February 28th, 2008


Appendix: Comes vs. Microsoft – exhibit px08562, as text


From: Pat Fox
Sent: Wednesday, July 24, 2002 9:01 AM
To: Dan Fowler (MSLI)
Subject: RE: *Microsoft Confidential” : Education and Government Incentives program

We went in to the BPR with $30MM in mind, but steveb said we shouldn’t cap it, since it’s “net accretive” to the P&L, ie if the field handles it correctly, it’s revenue that we wouldn’t have seen otherwise (ie if we lost to Linux), so even if we make only a few bucks per PC, it’s better than zero, plus we have the oppty to sell addl non-bootable sw into the customer.

Pat

—- Original Message —

From: Dan Fowler (MSLI)
Sent: Wednesday, July 24, 2002 8:58 AM
To: Pat Fox
Subject: RE: *Microsoft Confidential* : Education and Government Incentives program

Do you know much money was budgeted for this?

—– Original Message —-
From: Pat Fox [mailto:patfox@Exchange.Microsoft.com]
Sent: Tuesday, July 23, 2002 12:00 PM
To: Dan Fowler (MSLI)
Cc: Tom Baumbach (MSLI)
Subject: FW: *Microsoft Confidential* : Education and Government Incentives program
Importance: High

Thanks for making the time this morning. Here’s some background on EDGI.

PIs let me know if you have any questions.

Thx,
Pat

—- Original Message —-
From: Orlando Ayala
Sent: Tuesday, July 16, 2002 8:17 AM
To: SMSG Leadership Team; Pat Fox; Kurt Kolb; Sherri Bealkowski; Rogers Weed; Asia Pacific General Managers; EMEA General Managers; icon general managers; Geri Elliott; Linda Testa (LCA); Pamela Passman (LCA); Peter Wise
Cc: Steve Ballmer; David Driftmier; Rafael Perez-Colon; Mark East; Jeff Raikes; Jim Allchin; Chris Jones (WINDOWS)
Subject: *Microsoft Confidential* ’: Education and Government Incentives program
Importance: High

As many of you know, the Education Solutions Group [EdSG], and the Windows Client group team have been leading a cross-group effort involving LCA, OEM, WW Licensing and Pricing, and SMSG.

MS-CC-MDL, 000000651421

HIGHLY CONFIDENTIAL


The goal of this project is to provide a mechanism for emerging markets to build a rich, active, legal ecosystem around PC computing, and at the same time, make computers with Microsoft Windows preinstalled more affordable, especially in the education segment.

We recognize the critical importance of helping emerging markets build healthy and legal PC ecosystems and clearly the answer is having Windows be a core component. But in today’s difficult economic environment, it is clear that some institutions and countries are making decisions based on short-term price, rather than long-term cost and benefits of their IT investments. It is clear that Windows offers far more benefits to an emerging economy and to the immediate use of customers, we have to do more in emerging markets to help foster a Windows ecosystem.

Until all the details of the program have been developed, it is important that we have a way to address large PC purchases that involve low-cost/no-cost competitors in the education (and government} sectors, especially in emerging markets. Effective immediately, we are significantly enhancing empowerment by the GM to provide services and, where necessary, even dollars back to the customer to offset the cost of buying new OEM PC’s with *legal* Windows preinstalled instead of naked PC’s with Linux and/or other low-cost/no-cost software.

Example scenario:

The government of “X” is advocating using open source for all government-funded computers in order to keep “X” dollars inside the country and save the taxpayers millions of dollars. They are therefore looking at rolling out 50,000 PC’s with Linux to all their K-12 schools and run StarOffice for free or a locally-produced package that they can purchase for $5/desktop.

After extensive selling by the local MS account team, including the country GM, to convince them of the higher value, lower TCO, and overall advantages of the Windows-based eco-system in their country, the government still maintains that while there might be some premium attached to our software, it’s not enough to justify the investment and they will stick with their plan to go open source across all schools.

In order to compete more effectively against Linux and other providers on these deals, we can now leverage the Education and Government Incentive [EDGI] program to help tip the scales to MS in the deal. After engaging the regional team. the region may use funds to provide services and/or rebates to the customer with the following limitation:
Not to exceed the estimated Windows royalties recognized by MS from the OEM selling the PC’s to the customer (in the example, 50,000 PC’s at approx. $100/PC for OEM Windows XP Professional would result in a maximum of $5M for the individual deal).

An outline of the sales process is included in the attached program document.

While this program is available for both developed and developing countries, initial focus is being given to those areas where economic conditions often dictate low-cost/no-cost software as the only solution. This would include LATAM, Africa, Middle East, South Asia including India and PRC.

2/21/2003

MS-CC-MDL 000000651422
HIGHLY CONFIDENTIAL


Ideally, this will still result in a net positive on the Executive P&L as the OEM revenues would not have been realized if the deals had been lost. It is essential, therefore, that
we use this in only in deals we would lose otherwise
. Initially, we will track each deal, then reevaluate in aggregate at the end of Q1 and again at MYR to validate effectiveness.

IF an opportunity meets the criteria in the attached sales process and normal sales process has not been sufficient to close the deal then the GM should ensure that the following takes place:

1] Engage regional team in sales opportunity
2) Escalate to the “comphot’” alias for review by the competitive team, EdSG, and the Windows Client group.
3) EdSG wiil work with Windows Client Group and SMSG WW controller to ensure that funds are tracked and managed appropriately
4) Until appropriate OEM tracking systems are in place, it may be necessary for local account teams to validate appropriate Windows purchases by OEMs in order to ensure funds invested in customer do not exceed funds actually realized through the channel.

Action required:

1) RVP’s should ensure local response teams are designated as per the attached sales process. It is critical that we are really present and actively working in this accounts way before it is too late. We don’t want to be surprised by being “’out of the game:””
2) RVP’s should establish an approval process or empowerment guideline for their region
3) GM’s to communicate program to appropriate sales teams in the subs
4) GM’s to ensure regional response teams are engaged on any EDGI opportunities once teams are formed
5) EdSG (daviddri) to track and communicate EDGI account pipeline, work with Windows Client Group (patfox) to validate requests, and report back to results to RVP’s.
6) Bottom line do our best to show the great value of our software to these customers and ensure we get opaid for it under NO circumstances lose against Linux before ensuring we have used this program actively and in a smart way. We believe for those customers to stay with Windows is in their best long term interest to protect and expand the great value in their investment and also for our long term relationship with this critical segments in your markets. Use this actively as an opportunity to also build great relationships and recognition for our honest desire to partner with them because that is the true intention of the program.

As detailed processes are implemented, new, detailed guidance will be published. There will also be additional guidance provided at MGB. Questions may be sent to edgihq. As always, thanks for your efforts in continuing the fight to help countries realize their potential through truly great software!

2/21/2003

MS-CC-MDL 000000651423
HIGHLY CONFIDENTIAL


* The “convicted monopolist” part might be misunderstood. Microsoft was officially declared a monopoly, which isn’t illegal. They were convicted of abusing their monopoly status by using the very tactics described in this document.

Share this post: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Digg
  • del.icio.us
  • Reddit
  • co.mments
  • DZone
  • email
  • Google Bookmarks
  • LinkedIn
  • NewsVine
  • Print
  • Technorati
  • TwitThis
  • Facebook

If you liked this post, consider subscribing to the RSS feed or join us now at the IRC channels.

Pages that cross-reference this one

What Else is New


  1. Another Misleading Article Regarding Patents From Rana Foroohar at the Financial Times

    In an effort to promote the agenda of patent maximalists, many of whom are connected to the Financial Times, another deceiving report comes out



  2. Monika Ermert's Reports About the Crisis at the EPO and IP Kat's Uncharacteristically Shallow Coverage

    News from inside the Council shows conflict regarding the quality of European Patents (granted by the EPO under pressure from top-level management)



  3. Patent Troll VirnetX a Reminder to Apple That Software Patents Are a Threat to Apple Too

    VirnetX, a notorious patent troll, is poised to receive a huge sum of money from Apple and Qualcomm is trying to ban Apple products, serving to remind Apple of the detrimental impact of patents on Apple itself



  4. Links 16/10/2017: Linux 4.14 RC5, Debian 9.2.1, End of LibreOffice Conference 2017

    Links for the day



  5. The Systematic Erosion of Workers' Rights and Holidays at the EPO Goes Years Back

    The legitimacy of the staff's concerns at the EPO, having seen basic labour safeguards being shredded to pieces by Battistelli for a number of years (predating even the escalation of the conflict)



  6. Articles in English and German Speak About the Decline in Quality of European Patents (Granted by the EPO)

    Heise and The Register, two sites that have closely watched EPO affairs for a number of years, speak about the real problem which is declining patent quality (or rushed examination) -- a recipe for frivolous litigation in Europe



  7. Software Patents and Patent Trolls Not a Solved Issue, But the US is Getting There

    A media survey regarding software patents, which are being rejected in the US in spite of all the spin from law firms and bullies such as IBM



  8. US Patent Trolls Are Leaving and the Eastern District of Texas Sees Patent Cases Falling by More Than Half

    The decline of patent aggression in the US and the patent microcosm's response to Justices, having ruled in TC Heartland, curtailing patent trolls



  9. Qualcomm's Nightmares Are Getting Worse as Antitrust Questions Are Raised and Assessed

    Qualcomm is getting itself deeper in trouble as fines pile up and its multi-billion dollar dispute with Apple isn't getting it anywhere



  10. Forget About Apple; Two of the Leading Phone Makers (Samsung and Huawei) Are Bickering Over Patents

    Massive Android OEMs, Huawei and Samsung, are in a big patent dispute and this time, for a change, China is a legal battleground



  11. Tim Heberden From the Glasshouse Advisory is Throwing Stones in a Glasshouse to Create Patent Litigation

    IAM's latest lobbying, aided by the patent microcosm, for a climate of feuds and disputes (to line the pockets of the litigation 'industry')



  12. Access to Medicine is More Important Than Patents

    Some of the latest news about patents that impede/deny access to crucial medication; strategic litigation from the generics sector, seeking to invalidate patents and then offer low-cost alternatives



  13. Links 14/10/2017: Windows Breaks Dutch Law, Wine 2.19 Released

    Links for the day



  14. The Patent Trial and Appeal Board (PTAB) Supported by Congress, a Federal Judge, Soon to be Supported by the Supreme Court Too?

    The Patent Trial and Appeal Board is still widely defended, except by the patent microcosm which likes (and profits from) patent trolls and litigation Armageddon



  15. Patents Are Turning BlackBerry and Nokia, Which Used Android, Into Anti-Android Fronts That Tax Android OEMs

    The Canadian BlackBerry has sued BLU in the US only to compel it to pay 'protection' money; Nokia's patents are being scattered to trolls, which are doing something similar (without risking litigation themselves)



  16. The Unified Patent Court (UPC) is Rotting Like the European Patent Office

    The Unitary Patent litigation pipe dreams (or prosecution/trolling fast lane), which Battistelli's EPO long relied on, turn out to be the road to nowhere



  17. Lying and Faking Now a Standard Procedure at the European Patent Office

    The European Patent Organisation (EPO) under the leadership (or chairmanship) of Christoph Ernst continues to relay lies from Battistelli's Office, SUEPO rejects these, the Office lies about SMEs, prioritises Microsoft (again), and probably buys fake Twitter "followers"



  18. Links 13/10/2017: X.Org Server 1.19.5, pfSense 2.4, Final Stages of Ubuntu 17.10

    Links for the day



  19. Truly Terrible 'Journalism' About António Campinos Boils Down to Lobbying and Agenda-Pushing

    The expectedly shallow coverage of the appointment (succession) of Battistelli's French pick, which will likely change nothing of significance at the European Patent Office (EPO)



  20. Under Christoph Ernst, the Council is Just a Megaphone of Battistelli's EPO, Including on Patent Quality

    The Administrative Council of the EPO does not appear to be interested in a serious, adult, scientific debate about the quality of European Patents (EPs) and is instead relaying lies from Benoît Battistelli



  21. Links 12/10/2017: Cutelyst 1.9.0, Qt Creator 4.5 Beta

    Links for the day



  22. The Hogwash Begins: Patent Microcosm's Media Pretends Campinos is Anything But Battistelli's French Succession Plan

    A survey of media coverage regarding António Campinos, the French person whom Benoît Battistelli selected as his successor at the EPO



  23. Patent Quality at the EPO (European Patents) is Slipping While Battistelli's Office Boasts “Expansion of Early Certainty” (Even Worse)

    The EPO is staring down the abyss as high-level EPO management, quite frankly as usual, looks for new ways to further exacerbate patent quality (for superficial gains in the number of granted patents) rather than improve it



  24. Former Microsoft Employee Explains Why Microsoft 'Embrace' of GNU/Linux and Free/Libre Open Source Software is Like W3C Entryism

    Microsoft's latest moves are "EEE" that "concern" him, according to this new video



  25. Links 11/10/2017: Krita 3.3.1, KDE Plasma 5.12 Plans

    Links for the day



  26. China is Getting Full of -- and Fed Up With -- Patent Trolls

    In China too, as expected, local companies are becoming rather disgusted by a wave of patent trolls, enabled by misguided officials and bad advice from the likes of IAM (which sets up events in China at the behest of the patent microcosm)



  27. The FRAND Lobby is Trying to Sneak Software Patents Into Countries That Banned Them

    The patent lobby is attempting to find new ways to impose patents on software (with euphemisms like "reasonable", "non-discriminatory" or "fair"), even in places that explicitly disallow these



  28. Musical Chairs as Battistelli's 'Chinchilla' García-Escudero Márquez Could Reportedly Take António Campinos' Place

    A culture of nepotism continues to thrive at the EPO, with García-Escudero Márquez rumoured to be after Campinos' position now that he's taking Battistelli's position; García-Escudero Márquez is also Battistelli's 'chinchilla' at the appeal boards, obliterating any illusion of independence



  29. With Surveillance Recruits at the EPO, Are (or Were) DNA Tests Ever on the Agenda?

    Since a lot of what's happening at WIPO has also happened at the EPO, and overlap between the two is growing, we recall tactics which are illegal but are miraculously protected by the veil of immunity



  30. Links 10/10/2017: Plasma 5.11, GCC 5.5 Released

    Links for the day


CoPilotCo

RSS 64x64RSS Feed: subscribe to the RSS feed for regular updates

Home iconSite Wiki: You can improve this site by helping the extension of the site's content

Home iconSite Home: Background about the site and some key features in the front page

Chat iconIRC Channel: Come and chat with us in real time

CoPilotCo

Recent Posts