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

01.28.09

Antitrust: How Microsoft Schemed to Derail Dell GNU/Linux

Posted in Antitrust, Dell, GNU/Linux, Microsoft, Windows at 5:32 pm by Dr. Roy Schestowitz

Dell monitor logo

IT’S NOT UNCOMMON to state the obvious, but concrete proof can make all the difference in the world, especially in court. As we’ve already shown, Microsoft’s strategy has less to do with self improvement & development but more to do with targeted sabotage against attempts of competitors to… well, just to compete. Much like a totalitarian regime, Microsoft spots areas of friction and addresses them before they become uncontrollable; If not by force, then by brainwash [1, 2, 3, 4, 5] (control the minds to avoid direct and out-of-hand confrontations).

“Much like a totalitarian regime, Microsoft spots areas of friction and addresses them before they become uncontrollable…”Last week we gave evidence of this strategy occurring at Wal-Mart and this week we share antitrust material which shows how Microsoft reacted to GNU/Linux at Dell .

Exhibit px09280 (2002) [PDF] from Comes vs Microsoft contains correspondence between Microsoft seniors Bill Veghte and Paul Flessner (the guy who said “we should whack [Dell over GNU/Linux dealings], we should make sure they understand our value”).

They swap opinions and plans with Windows executives like Brian Valentine and Jim Allchin [1, 2, 3] in the background, in addition to anti-Linux characters like Orlando Ayala [1, 2, 3, 4, 5, 6], even some of today’s chiefs like Craig Mundie and Bob Muglia.

The subject of the messages is “Goldman Sachs Linux Panel.” The Goldman Sachs Group is close to Microsoft and also a shareholder, it is backer of PSI and EDGI taker too. Here are some bits of interest. The text, in full, is appended below.

Bill Veghte writes:

It’s not $50 of margin for Dell. It will get passed directly back to the customer and they are stuck with the same margin they have today. That is what happened on the desktop any time we made pricing changes broadly with OEMs and that is what will happen on the server (it is already happening on Linux pricing). It is just a fact.

Bill Veghte also writes:

Let’s start by articulating Dell’s perspective relative to the comments Russ made… Linux is Unix on x86. Dell sees it as the cheapest way to convert Unix LOB servers to being Dell customers. Dell sees no partnership with us on databases and partnership with Oracle as a way of pushing further into the enterprise. Oracle sees partnership with Dell and Linux as a great way at going after us at the lower end of the database market. Dell sees Linux as great negotiating leverage in their relationship with us.

[...]

Now, lets interject what I am asking into the picture…. We invest big, big $$ in Dell. We will continue to invest big, big $$ in Dell. I am asking that we do this investment with our eyes wide open. I do not want to invest $$ in Dell to fund their Red Hat efforts. I am asking that:
a) we be quite prescriptive in our investments with Dell relative to the competitive threats we see with Linux
b) we constantly benchmark ourselves against the actions they do with RedHat

Paul Flessner writes:

Now — there is nothing to disagree with me on around what we should do. We should whack them, we should make sure they understand our value, we should do all of the things you and Brian suggest. I totally agree.

In the end, if I were them, I would do all I could to see Linux succeed because it would put $50/pc(or whatever our OEM license costs) back into my pocket. Sure Windows has greater value and lower TCO and all of that. I would keep my relationship with MS and customers and do the dance. But every chance I get I would invest in Linux and try to make more sales on Linux because I increase my margin by $50/pc. It is an advantage for Linux.

Bill Veghte replies:

Dell’s behavior is predicated on us not acting in response to their actions. I want them to understand that every day they lead with Linux over Windows in Unix migrations they turn our field against them (take the southeast region mail thread as an example). I want them to think very very carefully about when and which forums they decide to push Linux very, very hard. Today, they do not. When they do, you can bet, behavior will evolve.

Veghte also expresses this concern:

He said their basic strategy is around open standard systems of which there are two; Linux and Windows. He said Windows three times during the whole discussion (it was a Linux panel tho) and then proceeded to push Linux very hard, never mentioning Windows. Ironically, the guy on the panel that was most balanced in their comments was the CTO of the BEA.

He wrote in the briefing:

Russ Holt (Server VP) was there representing Dell. He was introduced as the man behind Dell’s Linux strategy and the guy driving the Linux initiative at Dell. He started off by saying, Dell is the #1 OEM distributor of Linux and they are committed to seeing that position grow. He said that he believed Linux was ready for the enterprise and as way of evidence said Dell was a significant customer of RedHat and runs it on key mission critical environments; specifically their order entry system. He said he was seeing growth not only in the “traditional” areas of web & f/p but also web, Unix LOB and HPC. He then talked about how good the Oracle/Linux solution was and the strong partnership they had with Oracle around Linux. Later when he was asked about the open source development model he said he saw significant advantages to it because it enabled much closer interactions and synergy with RedHat.

[...]

Every other panelist underscored (a) that Linux was ready for prime-time in the enterprise, and (b) they were committing significant resources and product to make it even more so.

To summarise, Dell supported GNU/Linux, several companies praised the platform, and Microsoft pumped money into Dell, potentially in attempt to pressure it out of GNU/Linux.


Appendix: Comes vs. Microsoft – exhibit px09280, as text


From:       Bill Veghte

Sent:       Saturday, November 09, 2002 9:59 AM

To:           Paul Flessner

Subject: RE: Goldman Sachs Linux Panel

It's not $50 of margin for Dell.  It will get passed directly back to the customer and they are stuck with the same margin they have today.  That is what happened on the desktop any time we made pricing changes broadly with OEMs and that is what will happen on the server (it is already happening on Linux pricing).  It is just a fact.

—- Original Message —-
From:     Paul Flessner
Sent: Saturday, November 09, 2002 9:02AM
To:    Bill Veghte
Subject: RE: Goldman Sachs Linux Panel

I would go for the $50 pts of margin.  You need to think more broadly.  All you say is true but my statement is true as well. It is just fact.

—- Original Message —-
From: Bill Veghte
Sent: Saturday, November 09, 2002 8:08AM
To: Paul Flessner; Bob Kelly
Cc: Brian Valentine; Jim Allchin; Rodrigo Costa; Kevin Johnson; Jim Allchin; Rick Wong; Orlando Ayala; Craig Mundie; Bob Muglia; Gordon Mangione; Andrew Lees   
Subject: RE: Goldman Sachs Linux Panel

Sigh….Yes, I can disagree with your statement that Dell's behavior won't change.  If it won't change, then we should just throw in the towel and settle for %50 market share at best.  We will change Dell's behavior by thinking thru their motivations and opportunities and being very creative.

Let's start by articulating Dell's perspective relative to the comments Russ made…  Linux is Unix on x86.  Dell sees it as the cheapest way to convert Unix LOB servers to being Dell customers.  Dell sees no partnership with us on databases and partnership with Oracle as a way of pushing further into the enterprise.  Oracle sees partnership with Dell and Linux as a great way at going after us at the lower end of the database market.  Dell sees Linux as great negotiating leverage in their relationship with us.

All of these things are reality.  Given these realities, lets add our perspective to the picture.  If I am Michael Dell, I have to believe that my #1 competitor long term is IBM.  Dell has to decide what their competitive strategy is going to be against IBM.  If they are going to compete with IBM and it services driven organization, they are a) going to have to build a strong relationship with our field and service partners, b) they are going to have to bet on our engineering engine as their primary innovation machine.  That means a close partnership with us.  They need to understand that with the passage of time Linux and IBM become more and more equivalent.

Now, lets interject what I am asking into the picture…. We invest big, big $$ in Dell.  We will continue to invest big, big $$ in Dell.  I am asking that we do this investment with our eyes wide open.  I do not want to invest $$ in Dell to fund their Red Hat efforts.  I am asking that:
a)  we be quite prescriptive in our investments with Dell relative to the competitive threats we see with Linux
b)  we constantly benchmark ourselves against the actions they do with RedHat

4/6/2005

Plaintiff's Exhibit
9280
Comes V Microsoft

MS-CC-RN 000000982974
HIGHLY CONFIDENTIAL


This is an engineering statement, this is a marketing statement, this is a field statement.

—- Original Message —-
From: Paul Flessner
Sent: Saturday, November 09, 2002 7:13AM
To: Bill Veghte; Bob Kelly
Cc: Brian Valentine; Jim Allchin; Rodrigo Costa; Kevin Johnson; Jim Allchin; Rick Wong; Orlando Ayala; Craig Mundie; Bob Muglia; Gordon Mangione; Andrew Lees   
Subject: RE: Goldman Sachs Linux Panel

You can't disagree with my statement.  It is fact.  It is capitalism, like gravity.

Now — there is nothing to disagree with me on around what we should do.  We should whack them, we should make sure they understand our value, we should do all of the things you and Brian suggest.  I totally agree.

In the end, if I were them, I would do all I could to see Linux succeed because it would put $50/pc(or whatever our OEM license costs) back into my pocket.  Sure Windows has greater value and lower TCO and all of that.  I would keep my relationship with MS and customers and do the dance.  But every chance I get I would invest in Linux and try to make more sales on Linux because I increase my margin by $50/pc.  It is an advantage for Linux.

Where are our advantages?  This is a productive discussion.

This is just life.  I am not giving up.  I don't have a Penguin in my basement.  I LOVE Windows which is why I want us to face this so we can figure it out.

The sooner we recognize it the sooner we can get our heads around it and decide how to go after it.

—- Original Message —-
From: Bill Veghte
Sent: Friday, November 08, 2002 6:44 PM
To: Paul Flessner; Brian Valentine; Rodrigo Costa; Kevin Johnson; Jim Allchin; Rick Wong; Orlando Ayala; Craig Mundie;
Cc: Bob Muglia; Gordon Mangione; Bob Kelly; Andrew Lees   
Subject: RE: Goldman Sachs Linux Panel

Boy do I respectfully disagree with the statement "Dell's behavior is predictable and won't change…

Dell's behavior is predicated on us not acting in response to their actions.  I want them to understand that every day they lead with Linux over Windows in Unix migrations they turn our field against them (take the southeast region mail thread as an example).  I want them to think very very carefully about when and which forums they decide to push Linux very, very hard.  Today, they do not.  When they do, you can bet, behavior will evolve.

I think there are two very specific actions:
—> alignment in the field pushing Dell on the one that they are going to be most uncomfortabe with… Unix app migration (Kevin & Joe Marengi)
—> Clarity and metrics around Windows Server vs. Redhat in marketing and technology (product group and OEM group)

To Rick's last email on this thread around actions, I want to be careful we don't personalize it with Russ because I want to win him back but the key to that is thru Joe.

4/6/2005

MS-CC-RN 000000982975
HIGHLY CONFIDENTIAL


—- Original Message —-
From: Paul Flessner
Sent: Friday, November 08, 2002 9:07AM
To: Bill Veghte; Brian Valentine; Rodrigo Costa; Kevin Johnson; Jim Allchin; Rick Wong; Orlando Ayala; Craig Mundie;
Cc: Bob Muglia; Gordon Mangione; Bob Kelly; Andrew Lees   
Subject: RE: Goldman Sachs Linux Panel

The obvious but:  Dell is a HW company.  They are facing tremendous margin pressure in a commodity market.  If you are Dell you are being forced to squeeze every dollar out of the business you can to survive.  Given that situation you would be looking hard at that MS OEM payment.

Think back to Jim Cash's talk this week.  These guys are living that situation.

I don't have the answer here but Dell's behavior is predictable and it won't change.

—- Original Message —-
From: Bill Veghte 
Sent: Friday, November 08, 2002 7:55AM
To: Paul Flessner; Brian Valentine; Rodrigo Costa; Kevin Johnson; Jim Allchin; Rick Wong; Orlando Ayala; Craig Mundie;
Cc: Bob Muglia; Gordon Mangione; Bob Kelly; Andrew Lees   
Subject: RE: Goldman Sachs Linux Panel

I was sitting right across the panel from him.  We waved at each other briefly before the panel started.

He said their basic strategy is around open standard systems of which there are two; Linux and Windows.  He said Windows three times during the whole discussion (it was a Linux panel tho) and then proceeded to push Linux very hard, never mentioning Windows.  Ironically, the guy on the panel that was most balanced in their comments was the CTO of the BEA.

Dell is and must continue to be a partner with us but we need to be very aggressive in comparing our position and their investment in RedHat.

—- Original Message —-
From: Brian Valentine 
Sent: Thursday, November 07, 2002 10:27PM
To: Bill Veghte; Rodrigo Costa; Kevin Johnson; Paul Flessner; Jim Allchin; Rick Wong; Orlando Ayala; Craig Mundie;
Cc: Bob Muglia; Gordon Mangione; Bob Kelly; Andrew Lees   
Subject: RE: Goldman Sachs Linux Panel

Did Russ Holt know you were there?  I can't imagine he would be this blatant against us if he knew you were there.  If he knew and he is really doing this, then we have some serious thinking to do around this relationship.

—- Original Message —-
From: Bill Veghte 
Sent: Thursday, November 07, 2002 10:27PM
To: Rodrigo Costa; Kevin Johnson; Paul Flessner; Jim Allchin; Brian Valentine; Rick Wong; Orlando Ayala; Craig

4/6/2005

MS-CC-RN 000000982976
HIGHLY CONFIDENTIAL


Mundie
Cc: Bob Muglia; Gordon Mangione; Bob Kelly; Andrew Lees
Subject: Goldman Sachs Linux Panel

I was down at Goldman SW conference earlier this week doing a keynote and on the agenda there was a panel discussion on Linux after me so I asked to participate.  The panel consisted of CFO of RedHat, VPs from Oracle, BMG, BEA, Veritas and Dell.  It turned into quite a lively discussion as you can imagine.  Couple quick notes…

Dell & Linux:
Each company's position was quite predictably slamming us but the one that really got me animated was Dell.  Russ Holt (Server VP) was there representing Dell.  He was introduced as the man behind Dell's Linux strategy and the guy driving the Linux initiative at Dell.  He started off by saying, Dell is the #1 OEM distributor of Linux and they are committed to seeing that position grow.  He said that he believed Linux was ready for the enterprise and as way of evidence said Dell was a significant customer of RedHat and runs it on key mission critical environments; specifically their order entry system.  He said he was seeing growth not only in the "traditional" areas of web & f/p but also web, Unix LOB and HPC.  He then talked about how good the Oracle/Linux solution was and the strong partnership they had with Oracle around Linux.  Later when he was asked about the open source development model he said he saw significant advantages to it because it enabled much closer interactions and synergy with RedHat.

I spoke to Rick Wong about today but we need to make darn certain that our investments with Dell are benchmarked against any investments they make in RedHat.  The majority of their business is on Windows and their marketing, their website, and their investment should reflect this or we should call them on it.  Same goes for things like sales training or events.  When we do events, field engagement and measure our progress it should be benchmarked against the results and/or what they are doing with RedHat.  Dell is a key partner for us and one that imho will grow in significance in the coming years so it is a tricky balance but one that we need to be more aggressive around.

Linux & the enterprise:

This was the focus.  RedHat CFO spent his entire time talking about how their entire focus was Linux in the enterprise and all the things that they were doing to make it enterprise ready.  He then went on and on around the certification and testing programs that they had put in place and the partnerships they were building with companies like IBM, Dell, Oracle, Veritas, BMC, BEA etc.. Every other panelist underscored (a) that Linux was ready for prime-time in the enterprise, and (b) they were committing significant resources and product to make it even more so.

Linux Development Model:
Each of the panelists talked about the interaction with RedHat and the community development model as a real highlight for them.  They all talked about how it made it easier to impact the direction of the platform (including Dell ironically) and how transparent the whole process was.

4/6/2005

MS-CC-RN 000000982977
HIGHLY CONFIDENTIAL

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

5 Comments

  1. ajc said,

    January 29, 2009 at 2:54 pm

    Gravatar

    Typical MS, throwing their weight around. All this from a *convicted* *monopolist* who was supposed to stop doing these things. Microsoft needs to be forcibly shut down.

  2. Victor Soliz said,

    January 29, 2009 at 6:13 pm

    Gravatar

    The antitrust word in the article title made me want to post this link:

    http://standardsandfreedom.net/index.php/2009/01/29/a-bad-soap-opera/

  3. Roy Schestowitz said,

    January 29, 2009 at 6:22 pm

    Gravatar

    I have hundreds more coming. The Dell affair is relatively small compared to the rest, but it involves GNU/Linux.

  4. Bob said,

    January 30, 2009 at 8:03 am

    Gravatar

    Thanks a lot Roy, this was the smoking gun that I was waiting for. I am going to presume that these records are genuine because I want to study them well.

  5. Roy Schestowitz said,

    January 30, 2009 at 8:27 am

    Gravatar

    Yes, these are all authentic.

    We could use help extracting the text from more of them and organising by topic. If you can spare time and transcribe/label while you read them, please let us know.

    There are hundreds or thousands more just like that. Microsoft paid a lot of money to hide these, without success (Grouchy had snatched copies from Comes).

What Else is New


  1. Links 26/11/2014: Docker Patched, New DragonFlyBSD

    Links for the day



  2. Message to the Corporate Media: Bill Gates is Not an Ebola Expert

    Brainwash in the corporate media, including media that the Gates Foundation bribes in exchange for sheer bias, paints the super-rich as the solution rather than the problem



  3. US Government Finally Probes Microsoft Over Financial Fraud, Microsoft Then Bullies the Government With a Lawsuit

    Microsoft is finally being investigated -- perhaps properly too -- for its well-known tax abuses that have so far proved that Microsoft is "too big to jail"; Microsoft is suing the investigator, exerting its abusive power to discourage further investigation



  4. Gagging Critics: Micro Focus-Run SUSE Bribes Journalists in Exchange for Positive Coverage

    Amid the takeover by Micro Focus, SUSE pays journahayess (especially critics) who in turn become some kind of advertisements feed of Novell



  5. Links 25/11/2014: Tizen News, Jolla Tablet Past Million

    Links for the day



  6. Links 24/11/2014: Linux 3.18-rc6, Qualcomm Eyes GNU/Linux Servers

    Links for the day



  7. Boycotting Micro Focus International

    Microsoft's "Partner of the Year" is taking over the patron of SUSE and all of Novell's remains, except the patents (Microsoft has already grabbed those)



  8. Vesna Stilin's Remarks on Željko Topić: Part XI

    Vesna Stilin speaks about her confrontation with EPO Vice-President Željko Topić, who has criminal lawsuits against him in Croatia



  9. Links 22/11/2014: Linux Mint 17.1, Ubuntu MATE

    Links for the day



  10. Links 21/11/2014: Problems at Debian, Jolla Tablet

    Links for the day



  11. Links 18/11/2014: Linux 3.18 RC 5, New DigiKam

    Links for the day



  12. Special Report: Many Criminal Charges Against EPO Vice-President Željko Topić

    The abuses of Željko Topić, who has gained notoriety in his home country, are rapidly becoming public knowledge across all of Europe



  13. Links 16/11/2014: Xfdesktop 4.10.3, GNU Hello 2.10

    Links for the day



  14. Microsoft is Going Into the Anti-Whistleblowing Business, Dodges Criticism Over 19-Year Bug Door in Windows

    With Aorato acquisition Microsoft helps protect the criminals (from whistleblowers) and with lies about .NET Microsoft distracts from a bug that has facilitated remote access into Windows (by those in the know) for nearly two decades



  15. Reaffirming Microsoft's Long-Known Hostility Towards Net Neutrality, Microsoft Crashed Juniper

    Steve Ballmer is ranting against net neutrality and Juniper's business is in trouble after a lot of executives from Microsoft took over most top positions there



  16. Another Massive Step Towards Elimination of Software Patents as Even CAFC Rules Against Them

    After SCOTUS gets involved in the Ultramercial case, the CAFC finally decides to actually serve justice rather than dogma



  17. The GOP's Patent Reform Plan Not Effective Enough to Stop Massive Patent Trolls Like Microsoft/Nokia

    The corporations-serving GOP says that it wants a patent reform, but another reminder is needed of the futility of the suggested changes



  18. How the EPO's Executive Branch (Battistelli and Topić) Banned Scrutiny and Created Authoritarian Model of Control: Part X

    A look at highly dubious moves by EPO President Battistelli and his right-hand man Topić, whose abuses are becoming hard to oversee or even report



  19. Links 15/11/2014: Linux Mint 17.1 Release Candidate, Popcorn Time 0.3.5

    Links for the day



  20. IRC Proceedings: October 26th, 2014 – November 8th, 2014

    Many IRC logs



  21. The Terrible Joke Which is Microsoft 'Loving' Linux: Nightmares With UEFI 'Secure' Boot (i.e. Windows Monopoly Imposed) Continue to Affect GNU/Linux Users

    A reminder of Microsoft's sheer hostility towards GNU/Linux and long-reaching sabotage of GNU/Linux installations



  22. Patent Lawyers Worry About Section 101 in 'Alice' (and Other Patent News)

    A quick roundup of news of interest regarding software patents



  23. Will Write for FUD (Against FOSS)

    Black Duck rears its ugly head again, serving to show that it is in the business of changing perceptions and not in the information or analysis business



  24. Debunking Several Days of Never-Ending Lies About Microsoft and .NET

    .NET is not "Open Source", it cannot be forked (there remains patent threat), Visual Studio is still completely proprietary and it is expected to come to other platforms only because Windows has lost its dominance and Microsoft wants to perpetually control APIs (with software patents) and hence reign over developers



  25. Links 14/11/2014: LibreOffice 4.3.4, Ads Now in Firefox

    Links for the day



  26. Links 14/11/2014: GNOME 3.14.2, PulseAudio 6.0

    Links for the day



  27. Microsoft Windows is Still Designed as a Paradise of Back Doors, Intrusion, Wiretaps, and Interception

    At many levels -- from communication to storage and encryption -- Windows is designed for the very opposite of security



  28. Forget the FUD About Bash and OpenSSL, Microsoft Windows Blamed for Massive Credit Cards Heist

    Home Depot learns its lesson from a Microsoft Windows disaster, but it stays with proprietary software rather than move to software that is actively audited by many people and is inherently better maintained (Free/libre software)



  29. Windows 'Update' and NSA Back Doors, Including a 19-Year Bug Door in Microsoft Windows

    The back doors-enabled Microsoft Windows is being revealed and portrayed as the Swiss cheese that it really is after massive holes are discovered (mostly to be buried by a .NET propaganda blitz)



  30. Revealed: Microsoft is Trying to Corrupt the UK in Order to Eliminate Its OpenDocument Format-Oriented Standards Policy

    Microsoft interference with Britain's preference for ODF is now confirmed, thanks to a valuable news report from Computer Weekly; OOXML lock-in is being unleashed by Microsoft on Android users


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