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Leaked Microsoft Slides (2003): How to Win Against GNU/Linux

Summary: Microsoft's recognition of the GNU/Linux threat as shown in its internal, confidential presentations

WE have mountains of antitrust exhibits to show -- material that never reached any public attention because Microsoft settles quickly and buries evidence as part of the settlements. Today we deal with Comes vs. Microsoft Exhibit px07378 (2003) [PDF], from which wallclimber has managed to extract and reconstruct the main slides (high-resolution PNGs below). She could not salvage the entire text, but it was more than workable.



Internal documentation (intelligence) such as this proves truly valuable because it shows just how afraid Microsoft is of GNU/Linux, which Bill Gates calls the most potent competitor in operating systems. Apple is still a niche which targets mostly rich people, so surveys in developed countries alone do not tell the truth. In fact, in a recent presentation Steve Ballmer showed that globally, on the desktop, GNU/Linux market share is said to have exceeded Apple's.

There are many interesting portions to show in this latest exhibit, but here is some good material on GNU/Linux. From 2003 "IMPERATIVES" for example (highlight in red is ours):

FY 03 IMPERATIVES

* Drive Revenue & XP Excitement - Promote XP Software, Establish Products, Push to Professional+, Win Emerging * Turn the corner on Longhorn - Builds, alignment, execution * Earn the Trust of Our Customers, Partners, & Government - Community, closing the loop, compliance with SRPFJ * Win against Linux - Government, education, emerging * Invest in the Ecosystem - Metrics, roadmap, leadership * Develop People & Organization - Hires, communication, cross group, manager span, training

Challenges & Discussion * Winning Against Linux: government, education, enterprise, embedded * SRPFJ: OEMs hiding our innovations; Work to deliver, & comply * Dry spell coming in FY04 - revenue, annuity, competition * Emerging markets plan - Linux, other OSs, and piracy: ideas welcome * Improving sick ecosystem - quality, innovation, profit * Product segmentation - how many "premiums"? * Finding the right balance on legacy support * Making customer trust/connection a part of the culture * Piracy: How to make progress (and yet balance with Linux)


In the part about "COMPETITION", GNU/Linux comes before Apple and they use the TCO lie to fight against GNU/Linux.

COMPETITION Linux: Win in edu/gov't/emerging, prove lower TCO Apple: Partner w/ISVs/IHVs on scenarios, win digital media reviews/leadership Real: Maintain lead, broader/profitable ecosystem


A lot about media, DRM and also Palladium (Trusted Platform Module) is included in the full exhibit, which can be read as PDF or plain text below. A few slides were not reconstructed due to reading difficulties (the text is sometimes illegible due to scale, so reference to the original is better than a deficient translation).




Appendix: Comes vs. Microsoft - exhibit px07378, as text






________________________________________________ [Graphic: "OEM & HW Manufacturers" goes here]

Key points to make Innovation part of step function to drive needed volume

MS is the only one who cares about Windows-centricity

To rally industry around needed bold Innovaton, we need to message roadmap *much* earlier

While ODMs are a design aggregation point, we would prefer they not become a licensing aggregation point

OEMs play a different role than in the past - they now consist of channel partners and other PC brands and fulfill the role of customer touch rather than that of the platform innovator, however, technical engagement Is still required to create needed pull to ODMs.

Drive innovation for PC churn/market expansion/penetration Investments in quality such as OCA increase Windows value proposition to partners, end users

Investments in bold innovation to surf inflections

After market should not be an after thought. In conjunction with innovation we need to address aftermarket/incremental revenue streams in product development process

Make for frictionless Windows integration, increasing Windows criticality

Operating Margin chart Compaq: O.M. as reported by Compaq for its Access Business Group (commercial and consumer PCs, workstations, and handhelds) Dell: O.M. for commercial and consumer desktops, portables and workstations HP: Figures reported by HP for its personal and embedded systems group IBM: IBR estimates for IBM's PC business. we have removed the printing business from IBM's personal systems and printing group figures

Forward vertical integration Smaller ODMs are going direct to end users in targeted regions like Taiwan, larger ODMs don't want to compete directly with their customers Current turnkey or "no touch" ODMs: Wistron, Compal, Quanta, ECS

Progress on OCA OCA crash fixes tracking at 26% (goal 33% by SP1) From OCA crashes determined Dell was still shipping old nVidia image, causing 70k blue screens a month; working with Dell to fix

OPK improvements On track for covered OEMs -Componentization of the OS for ease of image creation, install and distribution -Imagability of the OS (both online and offline configuration) for creation, modification, and testing of the image -Full scriptability of the manufacturability tools suite complete with an SDK (Incl WinPE, Storage mgr, and updated scripting tool WH) -Total OS hardware independence (1 image for all models) -Reduction in the number of required SKUs/Images (HE/PRO become switches, Languages become optional components and hardware independence goes away with HAL PnP)

Additional examples of a much-needed OPK improvement -Automatic download of the latest QFEs which are seemlessly integrated into the preinstall process -Potentially have web "offers" that the OEMs can integrate into the preinstall from 3rd parties as well

Security/data protection after market programs suggestions -anti-virus packs -Palladium-related services -cross firewall management services

Home networking -Upsell of remote management -Management SW -Physical needs (note that UI will make the OS networking aspect transparent) -Demand marketing to push to high touch environments like Gateway stores, Best Buy etc.

Two ways to address IP Pooling. 1.Participate in industry pool where everyone pays to enter and then per unit cost. Not a good solution for Windows integration, but reasonable for a plus pack format. OEM channel would need to be set up to address integration of pack offerings. 2.We create the pool, offer TTM advantage, fee to enter for non-participants

30

Plaintiff’s Exhibit 7378 Comes v. Microsoft

MS-CC-Bu 000000180667 HIGHLY CONFIDENTIAL




[Graphic: "Software Developers" goes here]

Software Developers

______________ [rectangle top left]

SOFTWARE DEVELOPERS

Situation Analysis

Lack of new investment in Windows client code No killer Windows XP apps/solutions Corporate trend away from client code Trending to "dumb clients" is slowing/reversing Competitors in rich client space growing Macromedia Flash, Java Unclear adoption trajectory Continued decline of retail SW, enterprise client deployments

[rectangle top right]

FY '03 Strategy & Big Bets Short Term Targeted efforts around Tablet and eHome Continuing w/ NET FX evangelism Enhancements to Windows Catalog ISV portal close the quality feedback loop

Longhorn Plan LH API is 100% managed code (exposed) Cohesive strategy built on NET to leapfrog competition reinvigorate client development Need to attack both technology and business model issues for ISV market Hardware acceleration requires quantum eap in IHV investment and stability Growing from Corp/LOB to ISV and Web Apps

[rectangle bottom left]

Taxonomy

End-user

Pro ISV MGI, Corel, Adobe, Intuit, Symantec Freeware and shareware

Siebel, SAP, Reuters, ABB

Corp Schwab, Barnes & Nobles, Ford

Corp IT apps MSMARKET, etc

Web Amazon, E- bay

[can't read this entry]

Content Encarta, CNet Yahoo Lycos Google

Gartner, Dow Jones, Source One

Games & Ent xxxxxgamer, Electronic Arts, xxxxxxxx, Disney

[rectangle bottom right]

Next Steps Events LH API Owners Offsite May 23/24 (brada) LH API Design preview end-September (lenop) PDC in April '03 (MCG/charlesf) Risks Align CLR drops with major LH dates (encr) Align storage integration/deliverables given recent reorganization/refocus (pcelis) Set strong date/priority message across teams (jimali) Investments not being made New Win32 or Trident work

Microsoft Confidential 6/12/2003 FOR INTERNAL USE ONLY 31 ______________________

Top 3 takeaways for bpr 1. Work in short term is minimal and not about new api's -- more about marketing/positioning. Even w/tablet and ehome, these are niche efforts for small segments of developers. 2. Longhorn API effort is all about managed code exposure. This creates conflict w/the "legacy" teams such as office, who want an unmanaged (exposed) solution, and solutions for issues like management/delivery for unmanaged code as well. 3. The CLR focus must move from LOB/Corp to also include Pro-ISV (ms internal as well as external consumer ISV) - this is a change and a challenge

31

MS-CC-Bu 000000180668 HIGHLY CONFIDENTIAL




[Graphic: "Networking & Infrastructure" goes here]

Networking and infrastructure

______________________

NETWORKING & INFRASTRUCTURE

[top left rectangle]

Situation Analysis

Always-on wireless and broadband networking Paradigm shift to wide band wireless packet data Connectivity hampered by complexity, security, address shortage Optical technology leading to gigabit networking Broadband deployment stalled, blocked by lack of demand due to cost and lack of compelling scenarios Home networks still very difficult IM pervasive IP becoming signaling backbone - Carriers shifting to VoIP P2P applications spreading fast Enterprise Conferencing growing rapidly

[top right rectangle]

Big Bets

Secure end-to-end transparent communications - Authenticated, authorized, private and tamper proof communications between Windows systems - Implement Dist. RWs & IPv6 in end systems, Solve FW traversal Wireless - Always-on Nomadic (Wi-Fi, WAN, Wired) networking Roaming, Location, QoS, Power Management, soft Wi-Fi - Monitor & stimulate Wi-Fi hotspots everywhere: Public, Guest Communication and Collaboration - Establish Windows as the infrastructure platform for RTC - Enable presence-based multi-party multi-modal data conf - Telephony integration using SIP - Improved audio/video quality Ease of use and diagnostic enhancements - Reduce support calls and enhance user satisfaction by diagnosing & giving directed, actionable feedback to the user - Simplify Broadband Deployment; Painless internet connection, file sharing in the home

[lower left rectangle]

Key Ecosystem Metrics

Secure end-to-end transparent communications -Easy to deploy end-to-end security xx/xx Firewall/NAT issues -Get adoption of MS Client technologies IPv6 VPN DFW

Wireless -All laptops enabled for dual-band Wi-Fi, -90% of enterprises deploy Wi-Fi use 802 1X -Wi-Fi/WAN offering from a carrier in a very convenient

Communications and Collaboration Every PC ships with usable microphone and optional camera Every PC can have a phone number 80% of collab. apps. use Windows RTC/P2P APIs

Ease of use and diagnostic enhancements Reduce device related ODH issues by 50% Eliminate PSS calls w/r/t ICS & File sharing scenarios Windows Diagnoses 80% of network related failures

ISV ISP IHV NEP OEM

[lower right rectangle]

Risks/Issues

Blocked scenarios due to no clean short term firewall traversal solution Down-level platform support to drive adoption of new protocol initiatives. Resource shortage to pursue full plan given industry/technology trends. Particular concerns in Wireless, Networking ease of use, diagnostics Wi-Fi Hotspot efforts fragmented -Lotus SameTime, WebEx reach critical mass before MSFT is competitive Ecosystem Investigation Driving Enhanced distributed Service Provisioning on MSFT platforms

MICROSOFT CONFIDENTIAL 6/18/2003 FOR INTERNAL USE ONLY 32

______________________

32

MS-CC-Bu 000000180669 HIGHLY CONFIDENTIAL




[Graphic: "Digital Media Ecosystem" goes here]

33

MS-CC-Bu 000000180670 HIGHLY CONFIDENTIAL




[Graphic: "Digital Media Ecosystem Summaries" goes here]

digitalmediaecosys-summaries-small

______________________

DIGITAL MEDIA ECOSYSTEMS SUMMARIES

[top left rectangle]

Content

Situation $60B Industry threatened by file sharing / piracy Legislation & Copy protection drive content away from PCs Exponential growth in DM fueled by music Explosive DVD player & media sales Challenging business model for streaming media RealOne projected to hit 1M subscribers at CY02

FY03 Strategy & Big Bets Ensure Windows is central and valuable for content qwners Develop and promote subscription services based on WM Corona, Palladium Engagement in policy efforts short term, standards long term

Investments not being made Improved/competitive DRM for entertainment pre-longhorn Exclusive content rights and/or aggressive subscription offering

[bottom left rectangle]

Pro/Media ISVs/IHVs

Situation $8B industry migrating to more affordable, PC-based systems Expanded opportunity for Windows partnerships in response to competition from Apple Standards, Gov. mandates & non-MS DRM and CA

FY03 Strategy & Big Bets Grow the beachhead with Corona Hardware assisted encoding for real-time broadcast Continue to move upstream in content creation Investigate format alternatives for professional editing, interchange and archive (AVI, WAV, AAF)

Investments not being made Professional mastering

[top right rectangle]

Infrastructure Situation Broadband subs forecasted to grow >1000% to 130M by 05 Entrenched players and standards Global consolidation, commoditization and heavy debt

FY03 Strategy & Big Bets Win reference accounts in DSL, cable VOD Move CDNs caching vendors from xNIX to Windows Partner with outsourcing providers on NET services

Investments not being made Not building a VOD solution Not building a content management/CDN solution

[bottom right rectangle]

Consumer Electronics

Situation CE Industry projected up 3% to $98.7B for CY02 Entrenched and emerging standards - not PC friendly DVD upsurge ABM partnerships (Sony/Nokia/Real/AOL) Immature business models in VOD / Wireless Media CE Industry driving for home network control Commoditization / loss of IP control by CE companies (e.g. Phillips)

FY03 Strategy & Big Bets Ensure PC is central component in managing digital media on CE devices Ensure Windows provides enhanced DM experience for all connected devices Drive format and DRM adoption

Investments not being made Wireless Media Business Models & Standards Participation Media DRM stalled. No CA interop story yet Windows Media Brand development/broad WMA awareness PPC / Stinger Media Player

MICROSOFT CONFIDENTIAL 6/18/2003 FOR INTERNAL USE ONLY 34

______________________

WW Sales of recorded music fell 6.8% last year 1.6B consumer spend on burners, blank CDs & digital media players

Content sourced through file sharing and ripping v. subscription -Downloading music is number 1 digital media activity -Morpheus/Kazaa users >7M v. RealOne ~600K

34

MS-CC-Bu 000000180671 HIGHLY CONFIDENTIAL




[Graphic: "FY03 Non-Financial Targets" goes here]

Non-financial

______________________

FY03 NON-FINANCIAL TARGETS

[top left rectangle]

THOUGHT LEADERSHIP/PERCEPTION

Maximize impact of Tablet PC, Freestyle, and Mira in FY 03 Knowledge workers (reading, annotations, collaboration) Consumers (digital media, home network) Developers (managed code, storage, presentation, programming model) Communications (wireless, RTC, peer to peer) DRM (software, content) PC Hardware (quality, innovation, low cost)

[middle left rectangle]

SHARED BETS

MSN 8 (MSN) Longhorn (Office, Server, MSN) Developer Platform (Visual Studio) Terminal Server/Projection (Xbox, Mira) Devices (Windows CE, MPD) Feedback Loop (Watson/OCA) for Microsoft, industry Microsoft Update (Office) -PRD for tools, education (Product teams)

[bottom left rectangle]

CUSTOMER

Methodical customer connection process by end FY03 Fix 33% of OCA/Watson issues by SP2 Fix all MSRC & major P1 security bugs by SP1, SP 2 Drive customer satisfaction to 60% with XP Windows XP IPU to .28, MPI to 70 Days to Solution (<7 Days) = 90% (80%) QFE Days to Hotfix - P1 = 14 days (43)

[top right rectangle]

KEY PRODUCT DELIVERABLES Windows 2000 SP 3 Q2 2002 Windows XP Refresh Q3 2002 Windows XP SP1, Freestyle, Tablet PC, Mira, Embedded SP 1 MSN 8 Q3 2002 Corona Q4 2002 Windows NET Server Q4 2002 Longhorn PDC Q2 2003 Windows XP SP2 Q2 2003

[top-middle right rectangle]

COMPETITION Linux: Win in edu/gov't/emerging, prove lower TCO Apple: Partner w/ISVs/IHVs on scenarios, win digital media reviews/leadership Real: Maintain lead, broader/profitable ecosystem

[lower-middle right rectangle]

ORGANIZATION

Single vision/priorities for Windows Client, make WinBLT an effective decision making body Fill critical positions OHI + 5% in communication, x-group, & connection Progress on org span by Oct people review

[bottom right rectangle]

ECOSYSTEM

All XP ingredients: >50% of market leading products DFW % of Pro Devs, targeting Win XP: 75% % of DFW drivers redist on WU: 50% % of DFW partners in OCA program: 60% WM format on Top 100 sites: 40% Top 4 NAT vendors support 6to4 (achieves 80% coverage)

MICROSOFT CONFIDENTIAL 6/18/2003 FOR INTERNAL USE ONLY 35

______________________

Guidelines

Purpose: Highlight the non-financial performance metrics/goals your business will be measuring in FY03. Assume that these metrics will be reviewed at the mid-year Scorecard Review next year.

Instructions: *Here are some ideas of things to include: - Thought Leadership

*Shared Bets - What investments are you making in support of key cross-company initiatives? - What will you deliver in the current fiscal year?

*Key Product Deliverables - Major product milestones/launches/important feature/product deliverables in FY03 - Product shipment dates - PSS/QFE response/service level commitments - Key trustworthy metrics (security, availability, privacy) - If acquisitions are a part of this process please discuss

*Customer Goals - Customer/product satisfaction goals - Support for communities - Important flagship customer situations *Organizational Goals - OHI, People goals and initiatives

35

MS-CC-Bu 000000180672 HIGHLY CONFIDENTIAL




[Graphic: "FY01-FY05 Windows Client P&L" goes here]

36

MS-CC-Bu 000000180673 HIGHLY CONFIDENTIAL




[Graphic: "FY 03 Imperatives" goes here]

[Contents of "FY 03 Imperatives" graphic as text: ************************************]

FY 03 IMPERATIVES

* Drive Revenue & XP Excitement - Promote XP Software, Establish Products, Push to Professional+, Win Emerging * Turn the corner on Longhorn - Builds, alignment, execution * Earn the Trust of Our Customers, Partners, & Government - Community, closing the loop, compliance with SRPFJ * Win against Linux - Government, education, emerging * Invest in the Ecosystem - Metrics, roadmap, leadership * Develop People & Organization - Hires, communication, cross group, manager span, training

Challenges & Discussion * Winning Against Linux: government, education, enterprise, embedded * SRPFJ: OEMs hiding our innovations; Work to deliver, & comply * Dry spell coming in FY04 - revenue, annuity, competition * Emerging markets plan - Linux, other OSs, and piracy: ideas welcome * Improving sick ecosystem - quality, innovation, profit * Product segmentation - how many "premiums"? * Finding the right balance on legacy support * Making customer trust/connection a part of the culture * Piracy: How to make progress (and yet balance with Linux)

MICROSOFT CONFIDENTIAL 6/18/2003 FOR INTERNAL USE ONLY 37

[************************************]

37

MS-CC-Bu 000000180674 HIGHLY CONFIDENTIAL

________________________________________________

Credit: wallclimber

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