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Microsoft

Gateway Testifies To Microsoft's OEM Treatment 656

unconfused1 writes "Gateway testified yesterday about the incredible power that Microsoft wields over OEMs concerning Windows being shipped on every PC. It seems that if an OEM does not ship Windows on every PC they ship that they are severely penalized, and can have their license revoked."
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Gateway Testifies To Microsoft's OEM Treatment

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  • The article basically says that no pc company could consider breaking the agrement and not getting the $10 per copy discount. As far as i understood Microsoft cuts them off the discount if they are EVEN offering non MS solutions, not just dual boot situations scary
    • Maybe if a few of the top PC-maker execs had some sort of backbone, this would have never happened. Of course, they're just giving th consumers what they wanted right? Glad I've never bought anything that wasn't either a used machine (as in "sans OS") or made by Apple. Next computer will either be a new Mac or completely home-built.
      • Maybe if a few of the top PC-maker execs had some sort of backbone

        That sounds good in theory, but do you really think Dell or Gateway is going to get some "Backbone" when it would cost them millions, perhaps hundreds of millions of dollars a year. If they don't comply they are effectively giving thier competition a cost advantage. The Exective who successfully implements this, would be fired and the stockholder would probably sue the CEO for not maximizing profits. Oddly, only the smallest niche market players can afford to blow Microsoft off, because thier products cost more anyway.

    • by Anonymous Coward
      Actually the discount is way more than $10. Try $100 for XP Pro.

      The $10 was an extra "market development funds" refund that MS kicks back. It pays for the Windows logo you see in major OEM advertisments.
  • Dell (Score:4, Interesting)

    by blues5150 ( 161900 ) on Tuesday March 26, 2002 @12:05PM (#3228930) Homepage
    I would love to see what Dell has to say about the OEM agreements with MS. After all they did support Linux for a little while. Now that seems to have gone by the waist-side. I also wonder what the reprecussions of Gateway speaking out against MS.
    • Re:Dell (Score:2, Funny)

      by Carmody ( 128723 )
      This is what Dell has to say: "Dude, you're getting a blue screen."
    • Re:Dell (Score:2, Offtopic)

      by flewp ( 458359 )
      Uh dude, Dell shut down. [theonion.com]
    • According to the article, The new terms would affect contracts written after Dec. 16 for the top 20 PC makers. and Fama concluded that the new uniform pricing mechanism benefits those companies selling the highest volumes, such as Dell Computer. and "Dell may not want to be a witness, but Dell is affected in similar ways to Gateway because of uniform licensing."

      Maybe Dell has already spoken. Reference this recent slashdot article:

      More on Dell Dropping Linux Support [slashdot.org]
    • Re:Dell (Score:5, Informative)

      by dcgaber ( 473400 ) on Tuesday March 26, 2002 @12:28PM (#3229145)
      Dell has something to say on this matter. Read it here [washingtonpost.com]. Basically MS e-mails/memos released at the trial last week discussig "hitting the OEM [Dell] harder than in the past with anti-Linux actions," while other e-mails urged Bill Gates and Steve Ballmer to remind Dell "of the meat of why it's smart to be partnered with Microsoft."

      Dell's response? A spokesman for Dell, Mike Maher, declined to comment on the case but said the company sells computer equipment with the Linux operating system installed if requested.

      "We still offer [Linux] on the [corporate] side and as needed as customers ask for it," he said.

      Naturally, this shows a fear of retribution, but shortly after the emails, Dell stopped offer linux on the desktop.
    • Re:Dell (Score:5, Informative)

      by JordanH ( 75307 ) on Tuesday March 26, 2002 @12:30PM (#3229153) Homepage Journal
      • I would love to see what Dell has to say about the OEM agreements with MS. After all they did support Linux for a little while. Now that seems to have gone by the waist-side.

      Dell stopped support for Linux? I wonder why? [idg.net]

      I won't make you go digging (quoting from the above article):

      The states intend to introduce a series of documents detailing discussions Microsoft had with Dell Computer Corp. with the goal of giving Dell a "hard time" about selling Linux desktops. Dell last year pulled its desktop Linux line.
    • I realize this goes against the grain of many elite slashdot Linux HAXXORS, but maybe you could try checking the facts first?
      Dell still offers Linux! [dell.com]
  • Well, shit happens (Score:4, Insightful)

    by kypper ( 446750 ) on Tuesday March 26, 2002 @12:05PM (#3228932)
    Microsoft is allowed to have that kind of penalty imposed; all these OEMs needed to do was get together and contest various parts of the licence agreement.

    I agree that they needed windows because of the demand, but that doesn't mean they take anything Microsoft demands without a whimper.

    In the words of Blake, "Do not go gentle into that good night... Rage, rage against the dying of the light."

    Fight for what you believe in, or you deserve it.
    • all these OEMs needed to do was get together and contest various parts of the licence agreement. Yeah right, these companies compete heavily for a tiny piece of profit compared to what M$ gets on each sale. All M$ has to say to one is, shut your yap or i will give the other guy a better price on the O/S allowing him to undercut you on the bottom line.
  • by xtremex ( 130532 ) <cguruNO@SPAMbigfoot.com> on Tuesday March 26, 2002 @12:07PM (#3228951) Homepage
    I've always known this was true, but now we have a REAL company vouching it..but how does MS do it? Do they send goons in and say "if you don't install Windows we will break your legs?" I mean, how is this different from racketeering? The Mafia does that in major cities with Waste Management. You can only use THEIR company, or they break your legs or set your building on fire. WHich is very similar to how tings work in Eastern-bloc countries.
    • The agreement goes more like this - if you don't load Windows on every box you make, and nothing but windows (I am a jealous god, and will have no others before me) then M$ will make windows so expensive for you that you won't be able to sell windows boxen at all and remain competative. Thus, you will be forced into a specialized second string market of non-preloaded computers, and probably go out of business. That's probably what it says.
    • by Binky The Oracle ( 567747 ) on Tuesday March 26, 2002 @12:39PM (#3229215)

      It's not racketeering because MS isn't technically committing a crime in order to commit other crimes. Well... sort of... antitrust law is a pretty freaky place and I don't like to think about it too much. =-)

      However, from The American Heritage Dictionary via dictionary.com:

      racketeer: n. A person who commits crimes such as extortion, loansharking, bribery, and obstruction of justice in furtherance of illegal business activities.

      I suppose one could say that MS has engaged in extortion of sorts, but since the extortion is in the form of a voluntary license agreement , and not backed up with threat of physical violence (the OEMs always have the "choice" of not licensing Windows), it becomes much harder to prove. That's where the antitrust things come in...

      The real problem with this whole issue is that the OEMs have been stuck between a rock and a hard place. On the one hand, they have Microsoft playing both good cop and bad cop: unconscionable licensing terms along with a sweet discount on the OS. On the other hand, they have consumers who are, for whatever reason, convinced that if they don't get Windows on their computer, their computer won't actually work.

      I don't know what the solution is. If I did, I'd be a highly paid consultant for several states' attorneys general. Perhaps if Microsoft were just prohibited from connecting their licensing terms or agreements to any other OS (i.e. no penalties to the OEMs for offering another OS...) that it might be a start. Probably not enough, but a start.

      Or perhaps if the OEMs were to create an association to negotiate with Microsoft for licensing terms things would improve. They really need a single voice, because MS is too good at divide and conquer. The real problem, however, is that MS is also too good at convincing consumers that they really need Windows because "there's nothing else available."

      In this case, Microsoft's goons are the consumers demanding Windows on their PC.

    • I've always known this was true, but now we have a REAL company vouching it..but how does MS do it? Do they send goons in and say "if you don't install Windows we will break your legs?" I mean, how is this different from racketeering? The Mafia does that in major cities with Waste Management. You can only use THEIR company, or they break your legs or set your building on fire. WHich is very similar to how tings work in Eastern-bloc countries.

      I don't know where you are from but in the United States exclusive contracts are a typical occurence in the business environment. The only thing that makes MSFT's an issue is that after a company has achieved a certain amount of market share it may be unfair for them to have exclusive deals with other vendors because it may effectively shut down the competition.

      AFor instance a common example of such exclusive deals is schools, stadia, fast food places and restuarants that only serve soft drinks from a particular vendor (e.g. only Pepsi or Coke products).

      However it is up to the courts to decide whether there was anything inappropriate about these OEM deals and if so to come up with a decision. Likening it to racketeering on the other hand is a gross exagerration and implies that you think that MSFT forces its competitors to accede to its demands through violent means. If you know this for a fact I'm sure the courts would love to hear your testimony.
      • It may not be racketeering, but it is abuse of monopoly power. I know that being a monopoly isn't inherently illegal, but using one monopoly to acquire another is - the question that remains is, is using monopoly power to maintain that monopoly illegal? I don't know.
    • Simpsons (Score:3, Funny)

      by Jagasian ( 129329 )
      They actually had a Simpsons episode about how Microsoft does business.
  • by tcd004 ( 134130 ) on Tuesday March 26, 2002 @12:07PM (#3228952) Homepage
    talking about this like its new news? It's like every three months people forget and have to report it again. This has been constantly reported since at least since 1997.

    This is why I think there's some kind of mind control going on in the windows OS environment that keeps people from remembering this story. Thats why only alternate OS (Mac Linux etc) users really remember it month to month. Oh well, I guess it gives C-Net something to publish.

    Witness the rebirth of ENRON! [lostbrain.com]

    tcd004
    • by Lendrick ( 314723 ) on Tuesday March 26, 2002 @12:11PM (#3228981) Homepage Journal
      Microsoft bullying OEMs isn't news. What's news is that someone actually has the guts to testify about it. Microsoft is quite capable of making Gateway suffer for this.
      • M$ may make Gateway suffer, but seeing as they already have a very small percent of the PC market share, they may stand to gain fans in the large community of *nix users. It's a loose/win situation
      • by johnnyb ( 4816 )
        Microsoft bullying OEMs isn't news. What's news is that someone actually has the guts to testify about it. Microsoft is quite capable of making Gateway suffer for this.

        ***

        Gateway's move was pretty smart, actually. Microsoft can't do ANYTHING to them or else they will have something else to testify and/or sue about.

        If a) MS loses their Trademark suit, and b) the OEMs get a backbone, they could offer Lindows as their next "upgrade" to their computers. The user might not even know that something was going on.
    • It is not M$'s predatory practices, it is that a major company was brave enough to publicly complain. Way to go Gateway!

  • Funny (Score:3, Insightful)

    by 4of12 ( 97621 ) on Tuesday March 26, 2002 @12:10PM (#3228972) Homepage Journal

    If you think back to how much MS had to push to get themselves pre-installed onto machines back in the 1980s where they were still fighting tooth and nail against competitive offerings.

    Now that Windows is effectively regarded as as much of necessary part of the computer as the motherboard, the shoe's on the other foot regarding their relationship with OEMs.

    Reminds me of the lyric from a song by the Police

    ...when you find your servant is your master...
    • If you think back to how much MS had to push to get themselves pre-installed onto machines back in the 1980s where they were still fighting tooth and nail against competitive offerings.

      Now that Windows is effectively regarded as as much of necessary part of the computer as the motherboard, the shoe's on the other foot regarding their relationship with OEMs.
      It's legal to establish a monopoly. It's not legal to use monopoly power to maintain a monopoly, or to establish another monopoly.

      What is funny is that Microsoft doesn't consider themselves a monopoly. They think they have to fight, tooth and nail, to barely hang on to that 90% market share. That's why they think what they did is right ... and that's why they'll continue to do it, illegally abusing their monopoly position, unless forced not to.

      • they'll continue to do it, illegally abusing their monopoly position, unless forced not to.

        I've certainly thought so.

        From that perspective, even Judge Jackson's breakup proposal would not have been an effective remedy, merely giving one company 90% of the OS market and the other company 90% of the Office productivty suite software market.

        They really need a Standard Oil type breakup into about 8 Baby Bills, each with about 25% market share in one of the two markets, each company ready to claw tooth and nail to increase their market share.

        Then you'd see some real movement in price, quality and innovation in the basic products. It's been too long that the Windows and Office have been mis-used as lock-in and leveraging tools for conquering other markets.

  • by Philbert Desenex ( 219355 ) on Tuesday March 26, 2002 @12:12PM (#3228987) Homepage
    Testimony like this and Michael Tiemann's puts lie to the MSFT propaganda about how consumers made them the multi-billion dollar owner of 90% of the market.

    It's pretty plain that consumers have *never* been offered a choice. No "market" for PC OSes ever existed.
  • by laard ( 35526 ) on Tuesday March 26, 2002 @12:12PM (#3228992)
    This may be a different way of looking at it but I see it as an "endorsement." If Gateway uses Windows, customers see it as an endorsement. If Gateway also uses other competing products, then that endorsement loses its meaning. If you saw a Britney Pepsi commercial followed by a Britney Coke commerical, would either endorsement be effective? So wouldn't it be in Pepsi's best interest to see that she only endorses Pepsi?
    • "If you saw a Britney Pepsi commercial followed by a Britney Coke commerical..."

      A Britney Coke commercial:

      Britneeeeee: Ah!

      'Hit me baby, one more time!"

      graspee

    • Sorry- didn't realise that "plain old text" eat angle brackets. See it *was* funny originally...

      "If you saw a Britney Pepsi commercial followed by a Britney Coke commerical..."

      A Britney Coke commercial:

      Britneeeeee: *SNNNNNIIIIFFFFF!* Ah!

      *pause, drumbeat drumbeat drumbeat*

      "Hit me baby, one more time!"

      graspee

    • If you saw a Britney Pepsi commercial followed by a Britney Coke commerical, would either endorsement be effective?

      Hell yeah! Now that you mention it, I think we should get to see Britney in EVERY commercial.

      Oh wait, you meant effective at advertising. Yeah - I guess you're right.
    • by ethereal ( 13958 ) on Tuesday March 26, 2002 @12:29PM (#3229150) Journal

      Does your grocery store endorse Pepsi when they sell Pepsi? Do you find that their "endorsement" has less meaning when they also sell Coke in the same aisle?

      I guess I don't see the "endorsement" angle here - retailers like Gateway or your local grocery store aren't endorsers of anything; they just stock what the public will buy and advertise it all.

    • So wouldn't it be in Pepsi's best interest to see that she only endorses Pepsi?

      Perhaps Britney would think it was in her best interest after Pepsi made it clear that they'd prevent her ever recording another CD again.

      TWW

  • by jdreed1024 ( 443938 ) on Tuesday March 26, 2002 @12:14PM (#3229001)
    Microsoft on Sunday filed to strike large portions of the submitted testimony from the proceeding before U.S. District Judge Colleen Kollar-Kotelly. She did not grant the request.

    "Uh, your honor? We'd like to delete this testimony since it makes us look guilty. We're really not guilty, so you shouldn't allow anyone to intimate otherwise."

    They're pretty dumb if they thought they were going to get away with that. Once has to wonder what will happen to Gateway now... I think MS will take the cow boxes to the slaughterhouse while they still can.

    • by telstar ( 236404 ) on Tuesday March 26, 2002 @12:48PM (#3229279)
      They're pretty dumb if they thought they were going to get away with that.

      • You're COMPLETELY missing the issue. Microsoft requested that large portions of the submitted testimony be dismissed because they have to do with the states presening NEW evidence. The current hearings are only supposed to address two issues ... the browser war, and the Java war. The 9 states are introducing evidence and presenting witnesses to discuss things like hand-helds, set-top boxes, and any other market that Microsoft has entered since the initial trial was completed. Not only are these issues out of the scope of this trial, they're actually weakening the states' position. Judge Kollar-Kotelly has already warned the states to stay within the domain of what was presented at during the trial and appeal phases, but the states continue to present this evidence in the penalty phase. By not striking this evidence from the record, Kollar-Kotelly leaves it on record for future appelate courts to handle, but she'll likely dismiss a great deal of it when she ultimately renders her decision at the conclusion of this phase.
      • Actually, it goes to establishing continued behavior.

        In this particular case it's even MORE important. The OEM License that Gateway is commenting about is the "new and improved" license that has been created by MS to comply with the DoJ's proposed settlement. This goes directly towards proving how inneffective the proposed settlement is.

        If the actual license is how it has been portrayed and this is the new license to meet the DoJ's criteria, then I think it goes quite far in proving that the settlement doesn't do anything. In fact, it seems to make the situation worse. I find it quite amusing that this license seems to reinstitute the old per-CPU license by calling it a royalty.
  • Kind of ironic (Score:5, Insightful)

    by jht ( 5006 ) on Tuesday March 26, 2002 @12:15PM (#3229013) Homepage Journal
    When I loaded the story to read it, it had a Gateway ad in the middle of the story. Go figure.

    More seriously, this is an example as to why virtually all PC-only vendors are screwed in the long run (and why I won't buy Dell stock, no matter how well they do). Everybody in the PC industry builds commodity hardware, running an OS they don't control, and tries to compete based on marketing and lowest-cost production. Thanks to things like Microsoft's OEM contracts, there's just no room to go anywhere else. Dell's success is strictly based on execution and volume - they bring nothing else to the table, really. Same with Gateway, and all the other commodity vendors.

    So if the MS monopoly is ever broken, it'll be at the hands of companies that have an investment in their own technology, and their own R&D. Perhaps companies that have access to non-Wintel technology (Compaq/HP, though they killed Alpha, IBM, Apple) will be able to take a stab at it. Right now, though, nobody but Microsoft really matters in the desktop supply chain.

    • Re:Kind of ironic (Score:3, Interesting)

      by uslinux.net ( 152591 )
      Actually, Dell has done quite well because they beat out Gateway for the Government FastTrack program. Basically, gov't agencies can bypass the usual procurement and go righht to Dell. It avoid the bureaucratic headaches and paperwork commonly associated with the gov't.


      Unfortunately (or fortunately, if you're Dell), only one company of any type can be on the FastTrack program. so, if you're buying a desktop for your employees,you buy Dell because it's easy. The program lasts 2 or 3 years, I think.


      So long as Dell retains their FastTrack status, they're set.

    • I was just reading Bob Young's piece in Open Sources [oreilly.com]. While it's certainly flush with optimism that now seems naive, he's pretty convincing when he points out that Heinz sells a absolutely replicable product, and still controls 80% of the ketchup market. They've simply built such a strong brand that they define what ketchup should taste like.
      I'd say that Microsoft has built one of the strongest brands in the world, mostly by applying clever and well-branded systems integration (a fact the head of Microsoft research makes no bones about in a recent article in the Economist [economist.com]. Short of drastic legislation (which we just are not going to see under this administration), the only thing that would knock MS out of the catbird seat would be weakening of the brand. (one thing that would probably weaken the brand is interoperability and hence less distinguishability between Windows and Linux). What's surprising is that people don't seem to care about brand when it comes to PDAs and embedded devices, but they sure do on the desktop (after all, people spend a lot of money to BUY new versions of Windows, over and over).
      There's an object lesson to be learned about tech branding as attention shifts from the OS to the embedded devices and web services, and perhaps us Linux-zealots should be clever enough to try to learn from it.
  • I thought this.... (Score:3, Insightful)

    by josh crawley ( 537561 ) on Tuesday March 26, 2002 @12:17PM (#3229029)
    I thought disclosure of MS's agreement concerning OEM os'es were corporate secret (blabla fines and revocation of contract). How can Gateway testify if they are bound by NDA's associated to the OEM contract?

    Hell, maybe Gateway is realizing how much a pit Microsoft is when it comes to money. Or maybe it's MS's new contracting agreements ( if no upgrade within 1 year after new product comes out, owe full price).

    It seems that MS is loosing its edge when it comes to controlling corporate powers. For the longest time, MS has made a standard (maybe not the best, but better than 10 types of hardware on 20 OS'es). We just have outgrown them.
    • I thought disclosure of MS's agreement concerning OEM os'es were corporate secret (blabla fines and revocation of contract). How can Gateway testify if they are bound by NDA's associated to the OEM contract?

      Contracts are enforced by the courts. (If MS breaks the contract illegally, Gateway goes to the courts to get them enforced. Same if Gateway breaks, and MS wants their contract-specified fine.)

      Because of this, the courts can say "testify" and Gateway doesn't have a choice. Of course, MS can (and did) ask to have secret data (the exact pricing tree) hidden, and the courts can agree to keep it "off the public record", but it still can come out into the open.

      IANAL, of course.
  • Moany old Gateway... (Score:4, Interesting)

    by Graspee_Leemoor ( 302316 ) on Tuesday March 26, 2002 @12:17PM (#3229032) Homepage Journal
    The basic message is that MS can't do Jack Shit to OEMs, except of course to force them to pay the proper price for Windows licences, and not receive
    any bonuses.

    This would make the OEMs less able to compete, price-wise with their fellow scum-sucking OEMs.

    Well, boo hoo, why should I care what happens to these unscrupulous box-shifters?

    Look at the facts: extended warranties of doom, badly-configured machines with the wrong drivers installed, corners cut to keep the price down (Tom's did a thing on OEMs recently, pointing out that they like to push the main specs like Pentium 4 1.8!!!! And then not mention the crappy $15 video card etc., which is true), help-lines that don't even when you get through to them, incompetence on all levels....

    Plus, just think- these OEMs aren't doing anything to earn their money- just employing people very little money to assemble pcs, man help-lines etc.

    I know I am going to get modded down as -1 flamebait for this because The Common Man moderates, but seriously, to paraphrase Monty Python: "What have the OEMs ever done for us?"

    graspee

    • What you should relize is that if OEMS can't compete, or that moving away from window doesn't allow the to compete, they will never changes.
      With the current MS Liscensing Scheme, any OEM that sells a PC must give money to MS, and must have MS OS or they lose MS's special prices.

      OEMs SUCK. I totaly agree, but the market will dictate who will survive. Right now they are all realling because it now takes effort to sell PC's. from 96 to 2000, everybody wanted on, very few people had one, now thats changed.
      I think the OEMs should be allowed to compete on all levels so the market can decide what it wants.

      "Plus, just think- these OEMs aren't doing anything to earn their money- just employing people very little money to assemble pcs, man help-lines etc."
      by your own statement, they are doing something. You think help desks, shipping, advertising, and assembly is free?

      I put my own box together, and recommend the larger local "mom and pops" to people.
    • by dmaxwell ( 43234 ) on Tuesday March 26, 2002 @12:52PM (#3229311)
      These problems are at least partly Microsoft's fault. The profit margin for these commodity PCs are almost non-existant. The OEM Windows agreements are secret and negotiated on a company by company basis. If one OEM has marginally better components or QA in it's PCs compared to a competitor then the answer may well lie in the difference between those OEM agreements. To an OEM, Windows is NOT a commodity: it is a single sourced component and Bill has 'em by the balls.

      There's at least one other thing we can blame on Microsoft as well. How about those "Restore CDs" that coincidentally will blow away any other OS partition that is on a machine? Ostensibly, it is because Microsoft is worried about piracy. Yeah, right.
    • by neo ( 4625 ) on Tuesday March 26, 2002 @03:32PM (#3230551)
      Well, boo hoo, why should I care what happens to these unscrupulous box-shifters?

      Because at the end of the day, you wont get anything better until there's no monopoly. Obviously it's impossible for the OEM's to do anything but sell crap because there's no room in the market for competition on anything but price. You can't bundle different software, you can't enhance anything on the hardware side that isn't part of the MS plan. In effect you are competting with other OEM's on the same level and MS gets to say who wins and loses because the only thing you look at is price.

      Take the yoke off these "unscrupulous box-shifters" and watch them start competting on things other than price... like innovation, service, etc.
  • And what about VA? (Score:5, Insightful)

    by lseltzer ( 311306 ) on Tuesday March 26, 2002 @12:17PM (#3229037)
    Gateway can assert that Microsoft pressured them, but if there's really a market for Linux desktops then other companies would be offering them and making sales.

    So why did VA stop selling Linux systems? Alleged Microsoft pressure on mainstream vendors not to sell Linux should only have made things better for VA, assuming there really was a market for Linux desktops. But the fact is that there is no serious market for Linux desktops.

    While we're at it, I simply don't believe that IBM could be subject to such pressure, and yet they too have pretty much abandoned the Linux desktop and notebook business. You used to be able to find Thinkpads for sale on IBM's site with Linux on them, but not anymore. Does anyone seriously believe IBM talked them out of this? Isn't the Occam's Razor answer that they weren't selling?
    • by Detritus ( 11846 )
      IBM has already had a taste of Microsoft's wrath. Microsoft came very close to forcing IBM to pay full retail price for the Windows 95 licenses that IBM needed to ship a competitive PC. That would have been a huge cost disadvantage for IBM. Microsoft was pissed off about IBM shipping PCs with OS/2 and Lotus SmartSuite, a competitor to Microsoft Office. From published reports, the OEM contract negotiations were very nasty. Microsoft's attitude was that IBM was not a "team player" if they bundled any software that Microsoft viewed as a threat to their own products.
    • by JordanH ( 75307 ) on Tuesday March 26, 2002 @02:35PM (#3230145) Homepage Journal
      • So why did VA stop selling Linux systems?

      Because VA had to compete against price-leader Dell and others selling systems with Linux loaded on them. It's possible that MS only tolerated Dell selling Linux as long as VA was still out there.

      This [theregister.co.uk] article is interesting in this regard. And I quote:

      Compaq was also mentioned in other memos, with Microsoft taking the line that OEMs should "meet demand but not help create demand" for Linux.

      So, at one time, it was OK with Microsoft for the OEMs to meet demand, but not to push Linux. Then, later, they clearly pressured Gateway and Dell to drop it completely.

      VA Linux no longer out there pushing Linux? Another highly visible Linux company down...

  • by zapfie ( 560589 ) on Tuesday March 26, 2002 @12:17PM (#3229039)
    For those who have not read it, I would suggest reading Sony's comments regarding Microsoft's licencing of Windows. [usdoj.gov] This is from Sony's submitted commments to the Microsoft Antitrust case. If you think being an OEM and having to include Windows on every PC is bad, imagine being an OEM and knowing that it is possible that "Microsoft [could] use its monopoly power to force its OEM licensees to give up intellectual property rights."
  • I still think that the fastest way to begin switching the masses to Linux would be for the Game manufacurers to release games for Linux first.

    How many times have you seen the latest, hottest most awesome game ever and then notice that the MS version is available but the Mac and Linux version is 2 to 3 months away(or not available at all)?

    Now how many people out there actually wait for that linux version vs. loading it onto your windows partition.

    Now imagine that Duke Nukem forever or Diablo 4 were coming out. But wait, only the linux version is available just now (shipping with a trimed down distro of course) but don't worry the MS version will be along in a couple off months.

    If you were a game geek would you wait?
    • I still think that the fastest way to begin switching the masses to Linux would be for the Game manufacurers to release games for Linux first.

      I guess technically that could be true, but you might as well say that people would migrate to Linux if Adobe Photoshop 8 came out in Linux first. Why in the world would this happen? Is there even a point to imagining scenarios like these?

      mark
  • by esteban666 ( 529067 ) on Tuesday March 26, 2002 @12:19PM (#3229059)
    I'm currently looking for a new PC and have found that no major manufacturer (Dell, IBM, Compaq, HP) will sell a PC without WindowsXP. I knew Dell *was* installing Red Hat, but apparently only for business systems. You would think that at least IBM, who are backing Linux, would offer a PC without Windows, but no. I'd be happy if the settlement gave the manufacturers the freedom to provide PCs with OSs other than MS or even without an OS. I don't feel like paying for MS software that I'll never use.
  • damned, gateway did something I like!
  • Their own fault (Score:5, Insightful)

    by TheGreenLantern ( 537864 ) <thegreenlntrn@yahoo.com> on Tuesday March 26, 2002 @12:25PM (#3229104) Homepage Journal
    You know, Microsoft doing this sort of thing is certainly VeryBad(tm), but it's nobody's fault but Gateway, Dell, and all the others that it happened.

    You really have to think about how things came to be this bad. Way back in the old 3.x days, if MS would have tried to pull something like this in the licensing, the OEM's would have told them to take a flying leap and installed OS2. So of course they gave the OEM's licenses dirt cheap, and probably a whole bunch of other things to get them to install Windows by default.

    Ever heard of looking a gift horse in the mouth? Did these OEM's think Microsoft was doing this out of the goodness of their hearts? Of course not, they didn't think about it at all. All they saw was the bottom line.

    Fast forward 5 years when the entire country is hooked up to Windows for life support, in part, I might add, to the OEM's willingness to throw Windows out there with every computer simply because they were getting a hell of a deal. Now they can't tell MS to take a flying leap, so of course MS is there to "restructure" the licensing deals. But is this MS's fault, or is it the fault of the OEM's for being greedy, and getting burned by it. Depends on your philosophy on life I guess: Is it the drug dealer's fault for selling crack, or is it the addicts fault for trying it?
    • "Fast forward 5 years when the entire country is hooked up to Windows "

      Well not the whole country. I only use windows at work and maybe one a month at home. Linux and BSD are great alternatives to those who can live withouth Office.

      What I find a real shame is that instead of complaining about having to ship with windows, they should try shipping with both Linux or BSD and windows. Then they will be giving the users a real opportunity to choose.

      One of the reasons that BE failed was that it did not have a big enough company behind it that sold preinstalled be systems. Dell and gateway used to sell Linux on their computers, and I think Dell still does on servers, but to many people are hooked to office and NOT windows. This is why I really think that if Mac were to port carbon and cocoa dn its gui to intel and compete with M$ on PC hardware it would be a true alternative to Windows that many would probably switch to. Assuming M$ would develop office on OS X.

      • Re:Their own fault (Score:2, Insightful)

        by JamieF ( 16832 )
        The reason Be failed as a dual-boot option is that Microsoft forced the OEMs not to! Read the lawsuit Be has filed against Microsoft. Microsoft also strongarmed OEMs (Dell) not to ship Linux at all, even as a single-boot option on servers. Microsoft uses whatever leverage it has to get its way, and since it has a monopoly, some of their tactics illegal. They do it anyway.

        It's not the OEMs who aren't giving users the opportunity to choose. They would love to sell more PCs by selling to folks who want FreeBSD and Linux and OpenBSD and BeOS preloaded. That's a competitive differentiator and they'd love to have that kind of offering. Their hands are completely tied by Microsoft as to what they can put on the PCs they sell. The only option they have is to drop Windows entirely and ship ONLY Be, Linux, or FreeBSD, and you can ask VA Linux, I mean, VA Software Corporation, how well that worked.
      • What I find a real shame is that instead of complaining about having to ship with windows, they should try shipping with both Linux or BSD and windows. Then they will be giving the users a real opportunity to choose.

        Microsoft specifically prohibits OEMs from doing this. Dual boot machines are expressly forbidden. If an OEM ships a dual boot machine, it has to be Linux on one partition and BSD on the other (or Be and OS/2, or whatever). Furthermore, selling machines preconfigured with an alternative OS (dual boot or not) is the easiest way to get Microsoft to yank your license.

        I don't know how Dell got away with selling Linux machines at the same time it sold Windows boxes. Apparently they've been bitchslapped back into submission.

        Anyone who has been following the issue knows that "giving the users a real opportunity to choose" has nothing to do with it. No monopoly here folks, move along. The nation's antitrust laws are no longer enforced with anything more than wrist slaps, because of an ideological fetish for "market based solutions" to everything, along with a blind spot for markets that have been broken by monopolies and cartels. With the Sherman Act out of the way, Microsoft's next problem will be the RICO laws. I can only assume these will be adjusted by law to apply only to individuals and not corporations.
    • "Way back in the old 3.x days..."
      they where doing it in the 3.x days.

      It use to be easy to sell computers. now that has gotten tight, there looking for alternative ways to sell there PCs, and that means they need to let the market drive them, that means alternative OS's.
    • Re:Their own fault (Score:3, Informative)

      by A Commentor ( 459578 )
      Microsoft acted this way back then TOO.. Since a majority of end-users wanted MS, MS priced it so that it was cheaper to license Windows on ALL machines that went out the door, than the 80-90% of the machines for the end-users that wanted MS. So if the OEM wanted to sell both MS and OS/2, they would have to pay for both licenses when they sold the OS/2 boxes. Adding to the cost of the OS/2 machine, increasing it's price, and thus reducing the demand for OS/2 even more.

      This is not the type of business behavior that should allowed when a company holds a monopoly over an industry. And the FED/9 states agreement doesn't address these serious issues that are still remaining.. At least 9 AG still have some common since.

    • Re:Their own fault (Score:4, Interesting)

      by adubey ( 82183 ) on Tuesday March 26, 2002 @02:18PM (#3230030)
      You really have to think about how things came to be this bad. Way back in the old 3.x days, if MS would have tried to pull something like this in the licensing, the OEM's would have told them to take a flying leap and installed OS2.

      No, this is incorrect. If you remember, the current anti-trust trial was preceeded by the DoJ trying to enforce a 1994 consent decree. This consent decree was created because Microsoft was using illegal tactics to compete against OS/2 in "the old 3.x days".

      Is it the drug dealer's fault for selling crack, or is it the addicts fault for trying it?

      Bad analogy. Everyone is better off with a standard OS ABI (be it a de facto standard, like DOS/Windows, or a de jure standard like POSIX). There wasn't really a standard microcomputer ABI in the early 80's. CP/M came close, but the biggest microcomputer vendors (Apple, Commodore, Atari) didn't support it as standard equipment. DOS (and then Windows) arose because people needed a standard ABI. It isn't the OEM's fault that the owner of the standard is willing to break the law to protect their profits.

      (NB: because there are people who always complain when I call "Windows" a standard: please note the different between an "open standard" and a "standard" and also the difference between a "de jure" standard and a "de facto" standard).
  • Poor OEMs (Score:2, Interesting)

    by Anonymous Coward
    If they had the balls, they would reject this ultimatum policy entirely and compete and be successful without Microsoft or Windows. There are other OSes out there, lots of them. Or if none of them are sufficient, they could team with a software manufacturer to create or port one for exclusive distribution. Or they could just sell their hardware without a bundled OS.

    The real problem is that these OEMs are on one hand complaining about Microsoft's power in the marketplace, but on the other hand (the one with the wallet), they are helping further entrench Windows in the marketplace by complying with Microsoft's abusive licensing restrictions, just so that they won't have to take a short-term risk. Nobody seems willing to take risks anymore, but everyone seems willing to run to the government when Microsoft chooses to shift its bulk around in ways they dislike.

    I can't really feel any sympathy for Gateway, or any other OEM with issues with MS' license. They've had every opportunity to try and work it out privately with MS, or barring that, to drop MS entirely, but they won't because they rely on MS (or believe that they do) to sell machines. So that's a decision they've made on their own. Gateway's market share is close to 10% - Apple has made do with less than that without Microsoft, so why can't Gateway break away from the herd (pun intended) and wield that market share and customer base they've been nurturing, if they're so dissatisfied?
  • It's a utility. (Score:5, Insightful)

    by Mike Schiraldi ( 18296 ) on Tuesday March 26, 2002 @12:27PM (#3229129) Homepage Journal
    Other monopolies (Verizon, the local water company, etc) aren't allowed to cut off good-faith customers. Your power company can't say, "You have to buy our skateboard and milk, they're bundled with our power!" Your local telephone company can't say, "We'll double the price of your phone service unless you stop using any competitors products!"

    Microsoft is a monopoly just like the others, and to most businesses, Windows is as essential as power or telephone service. Microsoft should not be allowed to withhold Windows from them or vary the price based on how much they subjugate themselves.

    (Volume licenses are okay, though)
    • Somebody mod this guy up. Way up.

      For all the comments that appear on /. about M$ - good, bad, or indifferent, this is precisely the point M$ has been trying to hide by claiming innovation, or whatever. It's not illegal to be a monopoly, but it *is* illegal to use your power once you are a monopoly to crush others.

    • by donutello ( 88309 ) on Tuesday March 26, 2002 @12:57PM (#3229381) Homepage
      There's a HUGE difference between Microsoft and Verizon.

      One is a monopoly that was granted by government fiat. A natural consequence of that is that the government has the authority to regulate it and impose restrictions. Verizon didn't build its monopoly by building a unique business model or providing unique service. Its monopoly was granted to it by the government.

      Microsofts "monopoly", on the other hand was built without government assistance.

      You have no way to obtain phone, power or water without the utility (government regulations see to that). You can always obtain an OS without Microsoft.

      Also, Microsoft was not cutting off the supply to Gateway. It was not "raising" the prices either. Gateway could always buy Windows at the full retail price at the time of retail availability. There is a cap on the price which is the retail price - a price at which several million people buy the product.

      Are you trying to say that because Microsoft has this "monopoly" that it owes the government nothing for, it should be required to offer a discount to Gateway just because it asks for it?
      • by Mike Schiraldi ( 18296 ) on Tuesday March 26, 2002 @02:16PM (#3230015) Homepage Journal
        You have no way to obtain phone, power or water without the utility (government regulations see to that). You can always obtain an OS without Microsoft.

        For most businesses, "an OS" is worthless unless it's an OS that can run their stuff. Microsoft doesn't have a monopoly on the operating system market, they have a monopoly on the "operating systems that can run Win32 applications" market.

        Your argument is like saying, "You can always power your business with steam, or hydraulics."

        Also, there is no way Gateway could be competitive if they had to pay full retail price for Windows. The profit margins are razor-thin in the OEM business.

        So Gateway has two choices: do whatever Microsoft demands or go out of business.

        That last part is the crux of my argument; if you reply, you should explain why it's okay that Microsoft can demand whatever they want from OEMs, and the OEMs have no choice but to obey.
  • I have always liked Gateway (nee Gateway 2000), but I have to wonder if they have decided to commit corporate suicide with this testimony. Any business punishes distributors who cross it, but Gates and Ballmer are known to be Soprano-like in the length of their memory and the degree to which they will go to exact revenge.

    Perhaps Gateway has concluded that they can't compete with Dell, and their plan is to be driven out of business by Microsoft, then sue for $20 billion to distribute to the stockholders?

    sPh

  • ... that the testimony clearly says that although M$ OEM contracts were draconian before the settlement, they used the settlement to make them EVEN WORSE, if thats possible.
    GOD, if nothing else, then this should clearly say to the judge that the settlement is not effective. On the contrary. It gives Microsoft easy way out of too benevolent contracts.
  • Am I one of the few people who don't seem to think there's anything with Microsoft saying, "hey, if you only sell machines with Windows on them, we'll give you a $10 discount on the licenses"? The angle, I think, that one needs to look at this should be: "hey, if you ship only Windows machines, we'll reward you with a discount", not "we're charging you more because you're not shipping solely our products". You see this sort of thing all the time in endorsement contracts. And, after all, if the OEMs actually saw a practical advantage to shipping something like Linux on desktops instead of Microsoft OSes ... like those side offer lines (business, professional lines, whatever) from Dell, etc., they're not obligated to stick with Microsoft. Free choice, right? And it's economically advantageous for smaller OEMs to stick with solely Microsoft offerings, given their options, unless you're so small as to be catering to the niche group of Linux users, in which case you often wouldn't need to bundle an OS anyway!
    • I'll sum up:
      It has to do with how MS is wielding there monopoly.
    • by EllF ( 205050 ) on Tuesday March 26, 2002 @12:59PM (#3229397) Homepage
      The problem is that there is no free choice. It is not a matter of "sell only Microsoft OSes, and we'll discount you", it's one of "sell only Microsoft OSes, or we disallow you *any* sale of Microsoft OSes." Now, Microsoft is an acknowledged monopoly - no suprise there. An OEM *needs* to sell Microsoft products in order to be competitive. No issue, thusfar.

      What Gateway is testifying to is that it's not fair for Microsoft to impose a blanket restriction upon them (via their OEM license agreement that allows them the ability to sell Microsoft products) which prevents them from selling other alternative operating systems at the same time that they are selling Windows. Such a tactic is an unfair leveraging on the behalf of a monopoly. It's legal for Coca-Cola to do it, for example, because there is a definite alternative - Pepsi. Neither are a monopoly. It isn't legal for Microsoft to do it (allegedly) because of (and due to) their monopoly status. Free choice would mean that an OEM could decide for itself how it wanted to sell its products. When a company MUST have a business model that limits that freedom ("don't sell linux systems or we'll effectively revoke your ability to compete in the current market, which we can do because of our monopolization of said market"), something is wrong.
  • by LL ( 20038 )
    There is a reason why MS tries to get at least 5 companies to push technology such as their WebPad. It's basically called divide and conquer in that it's easier for each OEM to gain market share by competing against each other than to gang up and change the rules. Think of it as a modified prisoner's dilemma with prisoners not allowed to communication and kept in separate cells so they can't revolt. That is the reason why OEM licenses are considered trade secrets by MS. Since each OEM doesn't know the special volume discounts (which are significant given the low margins of box pushing) of the others, they attempt to bargin a better deal which as OPEC has shown leads to similar concessions by the others.

    It will be interesting to see how Intel attempts to wriggle more negotiating space with the alternatives of Linux, HP Unix coming on-line.

    LL
  • It seems to me that Gateway may have just signed its death warrant. It is already in financial trouble: their recent Gateway Store idea looks like a bust, they are getting taken to the cleaners by Steven from Dell and the "current economic downturn", and their stock is in the toilet. Now, they just turned on one of the the only companies who could bail them out and keep them afloat, while at the same time making an enemy of the only supplier they have that is irreplaceable. No wonder the other OEMs don't want to testify.
  • by WildBeast ( 189336 ) on Tuesday March 26, 2002 @12:41PM (#3229232) Journal
    Look around you. Some establishments will only sell Pepsi while others only sell Coke.
  • by Random Feature ( 84958 ) on Tuesday March 26, 2002 @12:48PM (#3229282) Homepage
    Thank you for using our eSales Advisor live chat service. For your convenience and reference, we have attached a transcript of your chat session below
    Topic: Customizing A New Notebook

    Me: Can I have Windows XP removed before shipping?
    Carson: hi. welcome to gateway country. my name is carson, your esales advisor. may i please have your phone number in case this chat disconnects?
    Me: xxx-xxx-xxxx
    Carson: thanks. let me check
    Carson: which laptop do you want to purchase? and which operating system do you want?
    Me: I was considering the Solo 1400se. I'd prefer either Mandrake 8.1 or RedHat 7.2
    Carson: i see. we cannot send a laptop w/o an operating system.
    Me: Why is that?
    Carson: licensing agreement.
    Me: With who?
    Carson: microsoft
    Me: What are my options then - I take it Linux is not an option?
    Carson: correct. we can load xp, win2000, or 98.
    Carson: ok. you're welcome. thank you. bye.
    Carson: | eSales Advisor | 1-800-846-2036 x55238
    carson.kotay@gateway.com | 11410671:6051783

    I knew the answer, but I wanted to see it in writing from a rep.
  • by Junior J. Junior III ( 192702 ) on Tuesday March 26, 2002 @01:03PM (#3229431) Homepage
    ...Why couldn't an OEM hide behind a subsidiary or spinoff marque that they could use to sell hardware without the M$ tax.

    Suppose that, OK, Gateway computers HAVE to have Windows, because Gateway must follow the Way of Gates. But what's to stop Gateway from spinning off a tiny company called "Freeway, a subsidiary of Gateway" or whatever, and have *that* company sell all the non-M$ OSes they want? So M$ strips Freeway of any license to bundle M$ software. Freeway thumbs its nose and says, "So what?" Meanwhile, Gateway mocks sympathy for M$ and says, "You know, I really do wish we could better control those rogues down at Freeway. But our organization just doesn't have that level of control over our subsidiaries."

    Why couldn't this work?
  • by BroadbandBradley ( 237267 ) on Tuesday March 26, 2002 @01:37PM (#3229707) Homepage
    I wonder how many calls it would take?

    Call Gateway Sales
    Home or Home Office 800.846.4208
    Para Información sobre
    "Oficina en Casa" 888.299.7512
    Any Size Business 800.846.5211
    Education 800.211.4952
    State/Local Government 800.211.4952
    Federal Government 800.216.2940
    International Sales 605.232.2191
    Remanufactured PCs 800.846.3614
    Add-On Sales 800.846.2080

  • by Anonymous Coward on Tuesday March 26, 2002 @03:24PM (#3230483)
    One possible solution to the problem - let Microsoft "innovate" anything they want into the operating system, but prohibit them selling the OS to OEMs for a period of ten years. Just cut the relationship entirely - it's the ultimate leveling of the field, and removes all leverage that Microsoft has on the OEMs.

    OEMs would be free to sell machines with other operating systems, or none at all. Consumers would be required to buy Windows separately and install it themselves should they prefer that to whatever non-Microsoft OS the OEM preinstalled. This would also halt the other trend that MS and the OEMs are promoting - a lack of recovery disks.

    I think you'd see the following happen: Apple would immediately release an Intel version of OSX, since the business suddenly becomes interesting to them. RedHat, Mandrake, Lindows, and other as-yet unformed companies could raise the capital to make consumer friendly versions of their offerings.

    If you really want to get Draconian, use Microsoft's own arguments against them. They claimed that Netscape still had full access to the market via Internet downloads - so force them to offer Windows exclusively in the same manner.
  • by dh003i ( 203189 ) <dh003iNO@SPAMgmail.com> on Tuesday March 26, 2002 @06:27PM (#3231504) Homepage Journal
    This is just proof that the settlement isn't enough. MS should not be allowed to use predjudicial behavior in any manner. MS is a PUBLIC company. So, yes, they have the obligation to obey PUBLIC rules. It would be different if MS was a private company owned by one person; but its not.

    You can't refuse to sell black people food at publicly owned restaurants.

    Why should MS be allowed to PENALIZE companies for selling other OS'? Or for not selling ridiculously high quantities of MS products.

    This is just a method by which MS can unfairly maintain its monopoly, put itself ABOVE capitalistic competition.

    I don't see why people defend MS so much. Whatever you think of their products, whatever you think of whether or not they got to their present position by merit or fraud...they're still a monopoly. Monopolies are inherently not good. They are everything capitalism opposes.

    Even if MS were to play perfectly fair -- no crooked deals, no blackballing, no spurious lawsuit threats -- it still wouldn't be good enough. They would still hinder competition and deny consumers choice, if only by default.. Because they're so large, its impossible competing against them effectively; they can outspend you a million to one. Because they own so much of the desktop industry, few hardware or software developers offer software/driver versions for non-MS products.

    Let me put it to you this way. Lets just assume Gates was a saint, freakin' mother teresa, a Stallman on wheels. That still doesn't mean we should tolerate his current power. No matter how good the man, you wouldn't want to have a person be dictator of the United States, would you?

    Its the same thing with MS.

    Power corrupts. Absolute power corrupts absolutely.

Beware of Programmers who carry screwdrivers. -- Leonard Brandwein

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