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Leaked Microsoft Memo: How Microsoft Changes the Prices at OEMs to Block GNU/Linux Sales

Summary: Antitrust exhibit shows how Microsoft changes its pricing to suppress interest in Mandrake (GNU/Linux)

SOME PEOPLE wish to know why certain shop cease to sell GNU/Linux-powered computers (or sub-notebooks with GNU/Linux), or in some cases no longer make available GNU/Linux with comparable hardware. The truth of the matter is that Microsoft systematically sets the prices to deny GNU/Linux entry into the market.



We have just pulled an antitrust exhibit which shows what Microsoft is doing. As far as we are aware, this exhibit was never published or used by the courts before. The full exhibit (2003) [PDF] can be found as text at the bottom of this post. Here is the gist:

From: Brad Beadles Sent: Tuesday, June 24, 2003 4:31 PM To: Dale Watanabe Co: Bret Arsenault; Scott Johnson (DENVER); Tim Schmidt (DENVER); David Brandt (DENVER); Ann Nicholson Subject: LDS Church - Hewlett Packard Importance: High

[...]

Outside of the hardware they are considering alternatives to their current standard of Windows O/S and MS Works on the desktop in these local units. They are considering Mandrake, Debian, Red Hat and Open Office because of their upfront costs. HP is quoting their system to include both the Windows O/S ($80) and MS Works ($15) for an overall software acquisition cost of $95 for the O/S and Application Suite The Open Source alternatives are $8.50 for the O/S of choice which is currently Madrake (Open Office is $0.00). As you can see, we have a price delta of $85 between the MS solution and the Open Source solution.

Is there anything we can do with/for HP to lower the O/S cost to become more competitive? Dell is quoting $30 for the O/S and the MS Works product team is giving us $25 for MS Works for a price point of $55 for the Dell software acquisition costs.


Microsoft talks about becoming "more competitive". To understand what Microsoft means by that, this antitrust exhibit should be read.




Appendix: Comes vs. Microsoft - exhibit px08618, as text








From: Date Watanabe Sent: Thursday, June 26, 2003 3:59 PM To: Rick Wong; Rob Young (OEM) Cc: Kurt Kolb Subject: FW: LDS Church - Hewlett Packard Attachments: RE: LDS - Open Source - Quick Update; RE: LDS - Open Source - Quick Update

I took this offline with our guy, Brad, but I think we should be concerned that they are breaking out the OS separately.

Dale

From: Dale Watanabe Sent: Thursday, June 26, 2003 12:09 PHM To: Brad Beadles C€¢: Bret Arsenault; Scott Johnson (DENVER); Tim Schmidt (DENVER); David Brandt (DENVER); Ann Nicholson Subject: RE: LDS Church - Hewlett:t Packard

Brad, 1.. OEMs should NOT be quoting separate prices for OEM versions of OS and applications. If they are, they are violating their licensing agreement with us. 2, Given the fact that the prices that you quote from the OEM are no where near their true price from us, then the above is probably not a really issue, but the end user customer perception ends up getting skewed. 3. OEM OS prices are uniform based on volume, Anyone can figure out from IDC data, etc. that HP’s and Dell’s volume are virtually the same. We do not have any flexibility to change prices on a deal basis. But I don’t think that is the real issue here.

Please give me a call. Rather talk through this with you.

Dale 425- 706-8 796 Cell: 206-953-2233

From: Brad Beadles Sent: Tuesday, June 24, 2003 4:31 PM To: Dale Watanabe Co: Bret Arsenault; Scott Johnson (DENVER); Tim Schmidt (DENVER); David Brandt (DENVER); Ann Nicholson Subject: LDS Church - Hewlett Packard Importance: High

Hi Dale,

Bret asked me to ping you with a competitive situation we are having with The LDS Church here in SLC. To net it out, HP and Dolt are their PC providers of choice. The Church has asked them to come back with systems that are under $500 for their local area offices and units around the world. This constitutes approximately 25,000 PC’s.

Outside of the hardware they are considering alternatives to their current standard of Windows O/S and MS Works on the desktop in these local units. They are considering Mandrake,

MS-CC-RN 000000784853 HIGHLY CONFIDENTIAL




Debian, Red Hat and Open Office because of their upfront costs. HP is quoting their system to include both the Windows O/S ($80) and MS Works ($15) for an overall software acquisition cost of $95 for the O/S and Application Suite The Open Source alternatives are $8.50 for the O/S of choice which is currently Madrake (Open Office is $0.00). As you can see, we have a price delta of $85 between the MS solution and the Open Source solution.

Is there anything we can do with/for HP to lower the O/S cost to become more competitive? Dell is quoting $30 for the O/S and the MS Works product team is giving us $25 for MS Works for a price point of $55 for the Dell software acquisition costs.

Regards,

Brad D. Beadles Microsoft Corporation 801.257.6400

Utah Events and Information http://microsoft.com/usa/offices/saltlake.asp

3/10/2005

MS-CC-RN 000000784854 HIGHLY CONFIDENTIAL



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