Dell Recommended" 11271

billwg

...

Perhaps from places like here:

"Early in the '90s, Microsoft's drastically improved graphical user interface-based operating system, Windows 3.1, tempted many away from the company's existing text-based operating system, MS-DOS. In the mid-'90s, Microsoft offered an even further enhanced product, the hugely successful Windows 95, which cornered as much as 90 percent of the operating-system market. The economics of pricing was Microsoft's chief weapon. The company gave substantial discounts to original equipment manufacturers (OEMs) that were willing to license Windows on a per-processor rather than per-copy basis1.

"Suppose that Windows was priced to OEMs at $50 a copy. At that price, a manufacturer wanted to install Windows on 60 percent of its 100,000 computers. The payment to Microsoft would be $3 million. Now imagine that Microsoft were to give the OEM a discount of 30 percent per processor whether or not the OEM installed Windows. At the discounted price of $35 per computer, the OEM would pay Microsoft $3.5 million. The additional cost of this deal would be only $500,000, or $12.50 per computer. With such pricing schemes, most OEMs chose to install Windows on all of their computers.

"This policy held two benefits for Microsoft. The first, and most often noted, was that it helped Windows become the dominant operating system... But a second benefit, though less noticed, may be even more important. In the peculiar economics of software, each additional copy sold costs the company almost nothing. By charging an implicit low price to OEMs, Microsoft took in as profit almost all of that low price on each sale... Economists have shown that the practice is often more efficient than straight single pricing because it profits from the segment of the market that values the product or service less.

"Anbreastrust enthusiasts contend that Microsoft's pricing scheme gave OEMs an incentive not to bother installing a Microsoft compebreastor's operating system. They're right, of course..."

1 Note that the licencing preferred was (is?) per processor, rather than per copy. This way, every time an OEM sells a processor, MS clocks up a Windows "sale and use", regardless of whether the product actually ships or not - regardless of whether it is used (or kept installed) when shipped; and regardless of how many processors (SMP?) are in the machine running a single copy?

There also appears to be evidence that the oem contracts expressly forbid other OSs to be installed. If they are, the OEM says bye-bye to their discount and have to pay full retail price for any Windows systems they want to sell. Are you, as an EOM going to want to have to pay full price so that any Windows system you sell will either be more expensive than your compebreastors, or offer no, or negative (ie a loss) return on every sale?

Have a look at section 6.1 of: www.stanford.edu-~tbres-Microsoft-TheEconomicsofTheMicrosoftCase.pdf

Or perhaps a perusal of section IV.A of:

I'm sure you can find more (if you bother to google like I just did).