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Antitrust: How Microsoft Came up with Windows Bundling

  • 27-07-2009 5:28pm
    #1
    Galen
    Closed Accounts Posts: 664 ✭✭✭


    http://boycottnovell.com/2009/07/26/windows-bundling-genesis/
    Summary: A journey back in time shows Microsoft’s explanation of bundling
    TODAY we take a look at some more fascinating Comes vs Microsoft exhibits. The first item, Exhibit PX00982 (1991) [PDF], shows how Microsoft was scheming to bundle with OEMs in order to block competition. That was almost 2 decades ago. Microsoft later compared OEMs to its "delivery people".
    One of Microsoft’s most predatory people, Brad Silverberg URL="http://boycottnovell.com/2009/01/19/brad-silverberg-on-z-nix/"]1[/URL], [URL="http://boycottnovell.com/2009/07/16/request-brad-silverberg-dri/"]2[/URL, suggests giving Windows for ‘free’ (bundling) and then sell it separately for an extortionate price. The same scheme continues to this date in order to artificially elevate the perceived value of Windows and virtually force people to buy Windows along with any computer.
    >From: bradsi Sat Sep 28 10:56:44 1991
    To: joachimk peterbre steveb
    Cc: alean jeffl janre markbu richardb richardf ronh teresach
    Subject: Re: Compaq Windows status
    Date: Mon Sep 30 10:30:02 PDT 1991
    you’re saying that when someone buys compaq dos for $99, they also get windows for free. but if you want windows alone, it cost you $150.
    and compaq wants windows for free.
    am I missing something why this is good for us?
    don’t forget that today, retail is still 61% of windows revenue.
    Joachim Kempin, who is also known for his predatory behaviour (see this for example), replies as follows:
    From: joachimk Mon Sep 30 10:53:23 1991
    To: bradsi
    Subject: Re: Compaq Windows status
    Date: Mon Sep 30 10:30:02 PDT 1991
    Do not see this as a price issue. They will pay. Remember IBM did not pay for DOS, but see what happened?
    See the strategic value: It will have lots of followers-OS1 can’t compete for now. IBM can only pitch OS/2 against it, but who wants this. The industry will rally even more around it and use it in every account against IBM.
    Money: for six month thereafter no or very low impact. Next year we plan for it. Whereby WIN becomes over time -may be earlier than expected -a 90% OEM product.
    Count Your profit, not the revenue.
    One reader of ours explains that “this is important because it demonstrates that the prime reason for Microsoft bundling was to kill DR-DOS. They had to come up with the techno-waffle later on.” This is a reference to excuses like, “people can’t install it themselves” or “people love Windows because many people use it.”
    The next exhibit, Exhibit PX00980 (1991) [PDF], was sent to Brad Silverberg and Joachim Kempin. It reveals what Microsoft had in mind when it conceptualised bundling.
    On 9/25 Mark and I met with Clark and Alan. Among other issues that Mike brought up, he came up with an alternative way for Compaq to bundle Windows. On 9/26 we had a meeting with their Windows team.
    [...]
    Mike’s alternative way of bundling Windows would be that Compaq bundles Windows with MS-DOS. There would not be a seperate DOS SKU; there would not be any choice. When somebody buys the Compaq DOS product he gets Windows with it.
    [...]
    Compaq issues with bundle/preinstall that are addressed
    1. The manufacturing preinstall problem
    2. The updating of Windows when it is on the hard disk
    3. Allows the end user the choice of installing Windows and allowing custom configuration of Windows according to specific requirements.
    4. Simplify their localization issues.
    5. Reduce cost – will not lose dos revenue with a preinstall and offset the cost of Windows by charging for it.
    6. Still allowing the end user the choice to buy other operating systems for his system; not burden the end user with either the implicit cost of Windows or having to deinstall Windows and DOS.
    7. It provides Compaq with a perceived leadership position with Windows by being the first oem to combine Windows and DOS.
    For MS it does the following:
    1. Compaq leadership position with Windows.
    2. With slick technology, Windows/DOS can be installed quickly w/p much of the pain installing Windows today. Although it is not a pre-install, it will be much easier to get Compaq to preinstall in the future if they combine Windows/DOS now.
    3. Gets many more Windows sockets out there. We believe that our attach rate today with Windows on Compaq 386 systems is between 25% and 35% based on their registration information. their current attach rate for DOS is 86%.
    4. It raises the bar for other oems and makes it more difficult for DRI to compete.
    5. Will increase our revenue from Compaq, depending on what we can get for the Windows royalty.
    The intent to ensure a prevention of choice is hopefully evident based on the above.


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