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MS pushes system builders back to distribution by withholding CDs

Tier-two assemblers claim they are being squeezed

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Microsoft plans to stop providing operating system CDs to direct OEMs. From January 2000, OEMs buying software direct from Microsoft will either have to put a back up of the system on the customer's hard drive, or provide an OEM branded recovery CD that is BIOS locked to run only on individual customer systems. This will apply to Windows 95 and 98, NTW4 and Windows 2000, sources told The Register. Originally planned for November, the software vendor's move has been pushed back to 1 January. This seems largely due to the fact that most system builders were unaware of the changes until a few weeks ago, and are unhappy with them. In a leaked email, Microsoft said it was making this move to prevent software counterfeiting via CD copying and sharing. Yet it will not stop the main aspect of the problem – professional software piracy. Nor will it prevent CDs appearing in people's homes, as smaller systems builders buying Microsoft product through distribution will still get CDs to send out to users. Plus, Windows 2000 upgrades are also to be sent out via CD, our sources told us, weakening the argument that this move will hit the software pirates. And it will make life harder for some people in the Microsoft OEM channel. Those systems builders without the muscle of the big tier-ones, but still with enough volume to buy direct from Microsoft, will be left out in the cold. Most will not be able to fulfil orders requiring certain specifications. The new rules will mean vendors building a special version of their BIOS with the PC builder's ID on the motherboard. The chances of some mobo makers agreeing to this are considered to be slim. "A total nightmare" was how one source described the situation. Of course, it will not hit the tier ones, who can insist that their own spec be used in orders. And neither will it hit the smaller resellers buying from distribution. The decision is seen by many as Microsoft pushing smaller PC builders into buying through distribution. Microsoft has been cutting back on its number of direct OEMs – Essex-based Hi-Grade Computers was canned in May. Hi-Grade joint MD, James Siabi, said the company was expected to order a minimum of 3,000 units of operating systems direct from Microsoft per month. "It suits Microsoft for people to buy through distribution because it can charge more for product and does not need as many account managers," said Siabi. Microsoft was unavailable for comment. ®

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