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UK's Dixons plans £200 Web (non-MS?) PC

Kalms says stripping out the expensive software - farewell, Windows?

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British retail giant Dixons seems poised to make the leap into the Internet appliance market with a £200 stripped-down PC - possibly even a minimalist Internet access machine. News of the company's plans in this direction were revealed by company chairman Stanley Kalms yesterday, and they would seem to bode ill for Microsoft. Dixons announced impressive results, with profits up 9 per cent to £237.1 million for the year to May 1, but the PC side showed how knife-edge the business has become. The group as a whole sold 27 per cent more computers over the year, but increased revenues here by only 3 per cent. Kalms seems determined to ride this wave, and to increase volumes as prices plunge further. Previously, he said, Dixons had worked on the assumption that specification doubled and prices halved every year, but he now reckons this is becoming a six month cycle. Hence the projected Internet boxes. If Dixons is quick on its feet, it can lead the market in the UK rather than have to follow in the wake of downward pricing spirals. Kalms says many customers want only email, Internet and home applications, so Dixons will 'despecify' computers by removing other bundled software. This in itself isn't going to be particularly good news for Microsoft, as it rules out Microsoft Office bundles, but the notion of a Dixons "access machine" is even more of a problem. A stripped-down set-top box style device could (in fact, almost certainly will) be sold in conjunction with Dixons' Freeserve. At the moment, as AOL seems to be finding, going the non-MS route entirely with a network computer type appliance produces a more commercially viable package. Microsoft - so far - has remained largely immovable on the pricing of operating systems to the OEM market, and as hardware prices crash, the proportion of the selling price that goes to MS soars. Short of Microsoft making a major intellectual breakthrough as regards its pricing strategy, it seems inevitable that Dixons will look elsewhere for its "access machines." It could follow AOL to Liberate (which is what NCI calls itself these days), or it might play footsie with Microworkz (see separate story). Or then again, if Stanley Kalms and Craig Barrett are back on speaking terms, it might take an interest in Intel's plans for low-cost hardware (these also involve AOL and Hughes Networks). Barrett, bless 'im, held up Dixons as a primary reason why PCs were so expensive in the UK last year, and got threatened with a lawsuit by Storefront Stan for his pains. (Dixons threatens legal action) Exquisitely ironic, considering Dixons' current posture on pricing. ®

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