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Re: Is Dell Embarrassed About Linux?

  • Subject: Re: Is Dell Embarrassed About Linux?
  • From: Roy Schestowitz <newsgroups@xxxxxxxxxxxxxxx>
  • Date: Wed, 01 Mar 2006 16:48:11 +0000
  • Newsgroups: comp.os.linux.advocacy
  • Organization: schestowitz.com / MCC / Manchester University
  • References: <du0k2g$2h3v$2@godfrey.mcc.ac.uk> <1141109628.181176.11220@u72g2000cwu.googlegroups.com> <du0tao$uem$2@godfrey.mcc.ac.uk> <44040799@clear.net.nz> <du1kup$14na$1@godfrey.mcc.ac.uk> <1141150474.339157.60000@z34g2000cwc.googlegroups.com> <1141168775.338107.133500@i40g2000cwc.googlegroups.com>
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__/ [ Larry Qualig ] on Tuesday 28 February 2006 23:19 \__

> Rex Ballard wrote:
>> ANY OEM must sign an OEM License agreement.  A manufacturer who does
>> not negotiate such terms could opt to pay full retail or wholesale
>> prices for retail versions of Windows which could be resold.
>> Of course, the OEM license agreement is always negotiated.  And
>> Negotiation involves having information that can be used as leverage in
>> gettin concessions from the other party while making acceptable
>> concessions themselves.
>> For the last 20 years, Microsoft has been the one with most of the
>> leverage.  Ironically, when Dell first started, their primary business
>> was selling PCs powered by SCO Unix.  They didn't NEED Microsoft
>> initially, but once Microsoft got their hooks into the company, Dell
>> had to make huge concessions.
>> Quite simply:  Dell is selling millions of machines with Windows.
>> Microsoft has the ability to revoke your contract or refuse to renew
>> Dell's contract unless Dell makes all of the concessions Microsoft
>> want.  Such an action that would have almost guaranteed bankruptcy.  A
>> CEO is a CEO because he thinks beyond his own family, children, and
>> personal ambitions - he assumes responsibilities for the families and
>> children of all his workers.  If someone pointed a gun to your child's
>> head, then handed you a contract which you would never otherwise sign -
>> under that threat of eminent death or injury to your child, you might
>> go ahead and sign.  Now imagine that you have 20,000 workers with
>> 40,000 children - and your refusal to accept Microsoft's terms would
>> mean that those workers would lose their jobs, those children might end
>> up turning to crime or possibly even die, and all because you wouldn't
>> sign the contract.  The scars of massive unemployment are quite
>> familiar in Texas.  The Oil industry has gone boom and bust several
>> times.  I'm sure that Michael Dell would do quite a bit to keep that
>> from happening to his people.  They could lose their houses, their
>> cars, their retirement savings, their kids college education funds, and
>> everything else they hold dear.
>> To a CEO, the threat of such hardship to so many people is no different
>> than pointing a loaded gun at your child's kneecaps and threatening to
>> pull the trigger.  And Bill Gates is equally determined to make sure
>> that the same thing does not happen to his people in Redmond, Bellvue,
>> and Seattle.
>> So here you are, with two very powerful and responsible corporate
>> leaders, ultimately sitting down at a table - Bill Gates trying to
>> protect his thousands of workers from a suddend and dramatic shift to
>> Linux, and Michael Dell, trying to protect his thousands of workers
>> from a sudden revocation of Dell's ability  to sell millions of
>> computer with Windows.
>> There is another problem though.  As Michael Dell, you have been
>> watching prices erode on Windows systems.  You have been losing money
>> on every PC you sell.  For about $20 more per PC you could almost
>> double the price and make more money per PC than you EVER made with
>> Windows PCs.  But to do it, you have to get some concessions from
>> Microsoft.  Concessions that Bill Gates knows will reduce the leverage
>> Microsoft holds over Dell.
>> The problem for Microsoft is that so many Microsoft loyal OEMs are
>> either already bankrupt, or virtually bankrupt, or losing money so fast
>> that they will go bankrupt within the next year or two.  The only thing
>> they have to offer is Vista, which has been delayed for almost 3 years
>> and won't really be selling in volume for at least another year - and
>> Windows XP which has now over 5 years old.  The ONLY OEM that is making
>> substantial profits on their PC products at the moment is HP, who
>> gambled and started selling AMD-64 machines, that were fully Linux
>> ready.  Microsoft was able to keep HP from shipping the machines with
>> Linux by offering Windows OEM licenses and allowing end-users to put
>> Windows functionality into the Linux boxes - but it's clearly a
>> problem.
>> Both Microsoft and Dell realize that the "Status Quo" isn't going to
>> work.  Dell will have to sell Linux machines to get some profitability,
>> and Microsoft has to offer something that will keep them in the
>> marketplace.
>> Microsoft can offer discounts for loyalty, and they can reduce
>> discounts in exchange for concessions to the Linux market.  The problem
>> for Microsoft is that even if they discount 1/2 the price of their
>> $60/machine OEM license in exchange for "lock-in" clauses, this is
>> nowhere near enough to offset the $300/machine potential profit margin
>> available in Linux machines - the real question becomes - how many
>> Linux machines can these OEMS sell - with or without Windows.
> ---> There is another problem though.  As Michael Dell, you have been
> watching prices erode on Windows systems.  You have been losing money
> on every PC you sell.
> According to SEC filings last year Dell sold  37,754,066 computers.
> Their gross profit was $9,015,000,000 or $238.78 per computer. Taking
> out R&D, advertising etc. we end up with a net profit before taxes of
> $4,254,000,000 or $112.67 per computer.
> Dell is nowhere near losing money on every PC they sell. In fact Dells
> profit for the last 3 years has been steadily rising.
> 31-Jan-03 = $2,844,000,000
> 31-Jan-04 = $3,544,000,000
> 31-Jan-05 = $4,254,000,000

You make it sounds as though the sun always shines atop Dell Computers. I
cannot deny the fact that 1-2 weeks ago, headline announced Dell's rise in
terms of profit, but then again you must account for stories such as _this_:


I wrote about it in the context of Intel's faulty motherboards.

Best wishes, guys.


Roy S. Schestowitz      | "Ping this IP, see if it responds the second time"
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