Gateway Testifies To Microsoft's OEM Treatment

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."

Comments

Well, shit happens

[kypper]

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.

Re:Well, shit happens

[PenguinLord]

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.

Re:Well, shit happens

[fanatic]

I'm confused - hasn't this sort of thing been outed already? How could the initial settlement not take care of this?

To me, this issue seemed to be the plainest example of Microsoft's abusive monopoly, something even the technically unsavvy could understand.

Understanding is not the issue. Will and desire to do ANYTHING MEANINGFUL to MS is the issue. DOJ, as commanded by Bush, has no will or desire to do anything to MS except make the antitrust suit go away. The lameness of the agreement and the fact that DOJ now acts like they are Microsoft's lawyers in trying to sell this piece of crap demonstrates that conclusively.

Funny

[4of12]

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...

Re:Why do people keep

[Lendrick]

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.

Microsoft wants product endorsement

[laard]

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?

Kind of ironic

[jht]

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

[electroniceric]

I was just reading Bob Young's piece in Open Sources . 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. 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....

[josh crawley]

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.

And what about VA?

[lseltzer]

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?

Re:Why do people keep

[billstr78]

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

Re:Microsoft is not out of line..

[Junta]

I don't know, could you point to another company that does this, checking up to make sure they aren't buying other products and then penalize for it? That is not simply good practice, it is as blatant of an example of anti-competitive you can get. This is leveraging your current dominant market share to raise barrier for entry to everyone else... Pretty much textbook anti-competitive..

Their own fault

[TheGreenLantern]

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?

It's a utility.

[Mike Schiraldi]

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)

It happens all around you

[WildBeast]

Look around you. Some establishments will only sell Pepsi while others only sell Coke.

Re:It happens all around you

[swagr]

Yes, but Coke/Pepsi won't penalize these people for giving you a glass of water.

Re:It happens all around you

[TheFrood]

and MS won't penalise OEM's for giving you free anti-virus software.

Whch isn't a replacement for an operating system. If they try to give you Linux or BeOS, that's a different story.

TheFrood

Call Gateway and ask for a Linux PC

[BroadbandBradley]

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

Re:You're being simplistic

[Mike Schiraldi]

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.

Cut the Gordian Knot!

[Anonymous Coward]

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.

Proof that the "settlement" isn't enough

[dh003i]

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.