__/ [ Rex Ballard ] on Monday 04 September 2006 10:12 \__
>
> Lawrence D'Oliveiro wrote:
>> In message <1157228509.288902.59380@xxxxxxxxxxxxxxxxxxxxxxxxxxxx>, Rex
>> Ballard wrote:
>>
>> > When Sam Palmisano ordered the PC division to stop preinstalling OS/2
>> > on PCs in 1995, he specifically stated that the retailers had told him
>> > that they would not sell the OS/2 machines.
>>
>> By that time it was pretty clear to everyone, I think, that OS/2 was never
>> going to be much of a success. It had already been out for about 7 years,
>> and still was only a niche player. The introduction of Dimdows 95 was
>> final proof, if any was needed, that OS/2 was irrelevant.
>
> Actually, that wasn't all that clear in early 1995. Windows 3.1 was
> very long in the tooth, crashed or hung 3-5 times per day, and could
> barely support a 9600 baud modem even though 56kb modems were available
> and functional. Windows NT 3.x was a dismal flop, selling less than
> 10% of expected sales, prompting Microsoft to repackage it as a server.
>
> Microsoft had completely hyped Windows NT, so by the time the OEMs were
> looking at "Chicago", and after nearly 18 months of delays and missing
> 3 critical market windows, they were seriously considering
> alternatives. OS/2 2.0 wasn't that great, but Warp 4.0 was very stable
> and had some great new features, including very robust support for the
> Internet. Novell had shut down their UnixWare workstation division,
> but those people formed Caldera with Ray Noorda's financing, and were
> loaded for bear. Bob Young was willing to offer Red Hat Linux to any
> OEM or VAR for as little as $2/copy in quantities of 1,000 or more.
>
>> > I wonder what kind of pressure was applied to the retailers?
>>
>> "Competition", I think it was called.
>
> Competition is when you offer a selection of products and your buyer
> selects those products which it actually desires. The Vendor provides
> only those products and make no restrictions on those products. For
> example, if the OEMs decided that they could, and wanted to, put Linux
> and Windows on the same hard drive, and let the end user choose which
> system would be started at boot-up, that would be competition.
>
> When a supplier "Makes you an offer you can't refuse" and demands that
> you stop doing business with other competitors, and stop making
> announcements that are "upsetting to the boss", and threatens dire but
> unspecified consequences if you do not cooperate completely with the
> wishes of "the boss", that's called extortion!
>
> This is EXACTLY what Microsoft did in Microsoft vs Caldera, in which it
> became clear that Microsoft threatened the OEMs with malfunctioning
> machines if they were to ship machines with DR-DOS instead of MS-DOS
> with Windows.
>
> This is EXACTLY what Microsoft did to Compaq in the contempt of the
> 1993 order case, where Microsoft notified Compaq that since they had
> not obtained Microsoft's prior written approval for the reconfiguration
> of the desktop, placing the Netscape Icon in place of the IE Icon, that
> all of their Windows licenses for their best selling line would be
> revoked in 30 days, virtually assuring bankruptcy of Compaq within 12
> months.
>
> This is EXACTLY what Microsoft did to IBM when, because they did not
> stop selling OS/2 completely, Microsoft released a patch which caused
> thousands of machines to malfunction permanently, requiring replacement
> of their Cyrix processor chips. Microsoft openly admitted to the
> sabotage, and offered a toothless settlement and an immediate release
> of SP3. But it was a well published warning to the other OEMs that
> Microsoft could and would destroy the equipment of any OEM who failed
> to cooperate fully with all of Microsoft's demands.
>
>> Sure, Microsoft has been guilty of many bad things, and I don't think it's
>> a very competitive company any more. But up to the early 1990s, its
>> dominance was far from assured (Apple alone accounted for about 25% of PC
>> sales around that time, as I recall), and it still had to behave as though
>> it gave a damn about its customers if it was going to survive.
>
> Keep in mind that Microsoft sell less that 1% of it's licenses to
> end-users. Nearly all Windows licenses are sold to OEMs and Corporate
> CIOs. End users are NOT Microsoft's primary market. In fact, the OEM
> is required to "protect" Microsoft from end users, fielding the calls
> of irate customers, handling the level 1 support calls (did you plug it
> in?), and refusing to refund money to customers who do not want to pay
> for Microsoft Windows.
>
> Microsoft "negotiates" with these OEMs while holding the equivalent of
> a "loaded gun" at the heads of the children of every employee in the
> company. The OEM knows that he HAS to sign an agreement with
> Microsoft, and Microsoft knows it too. If Microsoft does not grant
> them licenses for the OEM's PCs, then hundreds, possibly thousands of
> employees will be laid off, investors will lose money, and customers
> will be unable to get 2nd tier support.
>
> This gives Microsoft "negotiating leverage". They can demand anything
> they want, because they have monopoly power. They can force OEMs to
> wave the constitutional rights of their customers, they can force the
> OEMs to participate in collusion schemes, they can force the OEMs to do
> almost anything they want, legal or not. And they can stop the OEMs
> from doing almost anything Microsoft doesn't like.
>
> If Microsoft said, here is windows, here is our price, install it any
> way you like, with any other software you like, how many copies would
> you like to buy? I'll give you 10% off if you buy enough for 80% of
> your machines, and 20% off if you buy enough for 100% of your machines,
> and 30% off if you buy enough for 120% of your machines, then that
> would be competition. There would be nothing in the contract which
> would allow Microsoft to exclude competitors in any aspect of the
> market.
>
> Instead, Microsoft says "Here is Windows, and all of the supporting
> applications", you must distribute it in exactly the configuration we
> give you, with no alterations. If you wish to make any changes to the
> configuration, you must get our prior consent in writing, and if we
> don't like the configuration you wish to distribute, we can revoke all
> of your licenses. If you do not get our prior written permission, we
> can revoke all of your licenses. If we revoke all of your licenses,
> you will have to purchase new licenses at new prices.
>
> That is a contract designed to exclude competitors illegally. The OEM
> knows that if he proposes configurations which will "upset the boss",
> the negotiations for the following year will be much more unpleasant,
> and the prices will be higher, and certain programs might "malfunction"
> on the new product lines.
>
> That's extortion. If the sales reps were wearing black suits,
> sunglasses, and spoke in deep italian voices, the Attorneys general of
> 45 states would be cracking down on them and pressing charges under the
> RICO act. But because "the boss" is a nerdy geek with a squeaky voice,
> and most of the reps are wearing golf shirts and tennis shoes, it's OK
> for them to do business this way.
>
> Microsoft is above the law.
> There is no law.
> Lawlessness prevails.
Good post. And for all I can tell (my knowledge is admittedly limited), all
are valid points. To several of these points I could easily provide backing
in the form of press releases.
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