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MS' penalties for selling Linux – not punishment, as such

It's the process, stupid...

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Massachusetts, pursuing its lonely appeal against the Microsoft antitrust settlement, says it is looking into whether the company has punished a computer maker for promoting Linux, and is thus in breach of the settlement. One might observe that the Microsoft-DoJ deal was so liberal from the company's point of view that it would surely take a great deal of thought and effort to be in breach of it, but we have, largely, been here before.

And in all probability, anything Massachusetts does smoke out in the way of a case will run into the sand, as happened the last time. Massachusetts says that Microsoft may have retaliated against the unnamed company for its activities in pushing Linux, but what is retaliation? In a nice tidy and simple world it involves something absolutely clear-cut such as a threat to kill your firstborn, burn your house down, or nailing a dead cat to your door. Trust me on this, Massachusetts will find no dead cats, smoking or otherwise, because in the wonderful world of Microsoft OEM sales it is much more complex; there may be something that you and I might think of as pretty close to 'retaliatory action,' but it will not be something that Microsoft's lawyers will find themselves unable to argue a case for.

Look at what happened the last time, and how it played at the trial. In the years up to the launch of Windows 95 IBM's OS/2 was perceived by Microsoft as a serious threat to the company's control of the OS platform, and in some senses, if maybe a few things had panned out slightly differently, Microsoft could have been right. By the time Windows 95 was almost ready to roll OS/2 was no longer a serious threat (to precis massively, IBM had had its chance and blew it), but what you and I might construe as retaliatory action cranked on regardless.

Volume sales agreements meant, effectively, that Windows was more expensive for IBM the more machines it shipped with OS/2 preinstalled, and of course the fewer Windows machines it shipped the less chance it had of being one of Microsoft's high volume special friends, paying special friend prices. Microsoft co-operative marketing agreements had the effect of penalising companies shipping machines without Windows preinstalled, and immediately prior to the Windows 95 launch IBM found itself under threat of not having a 95 licence full stop. This threat however related to an allegedly unconnected dispute, so could not be retaliatory action as such. Nor indeed could lousy pricing deals be, either. The more you ship, the better the price you get, and the more of your own marketing muscle you put behind our product, the more we will co-operate, and the more effective our joint marketing efforts will be.

Hell, that's fair, isn't it? But just to be on the safe side, you're under NDA as far as your OEM agreement is concerned.

As it happens, the legal process (such as it was) did not altogether agree that all of this was fair. Microsoft is now supposed to be operating more transparent and non-discriminatory pricing policies for OEMs, and is also not supposed to be taking retaliatory action against PC companies who ship other stuff, which is where Linux and Massachusetts' current (possible) beef comes in.

But again, what is retaliatory action, and where is it? Or where was it? Although Microsoft's policies with reference to IBM certainly had the effect of discouraging IBM from preinstalling OS/2, you could just as readily call the pain self-inflicted. Microsoft did not nail the cat to IBM's door, its processes merely provided IBM's bean-counters with a set of bottom lines which showed that IBM was hurting itself by shipping OS/2 machines and not putting all of its weight behind Windows. Evangelists within the company would therefore be on the receiving end of increasing 'why are you doing this to us' gripes, and would eventually find themselves categorised as deluded, increasingly isolated nutters. Monopoly by process, not retaliation.

Because of the terms of the settlement the mechanisms that comprise the process will have to be different this time around, but they will most assuredly will exist, will be explicable and logical as far as as Microsoft is concerned, and will in any event be tweaked by Microsoft if it turns out the judge has a problem with them. This will, as previously, not make any serious difference.

Currently it is abundantly clear that Microsoft has a 'get Linux' policy, and as far as the PC companies (and indeed the customers) at the other end of the shotgun are concerned, this will have a discouraging effect. But it will be discouraging for all sorts of not obviously retaliatory reasons. Say you've done a bit of piloting of Linux systems in your company, you figure you're all set for a general rollout, but then people in your own company start coming to you explaining how much green-lighting it is going to cost, because you lose the special pricing deal Microsoft is offering? This is the slush fund in operation, and as far as Microsoft is concerned it's all perfectly legitimate and part of the product marketing process. It's certainly difficult to tag discounts as retaliation - unfair, maybe, but you can argue the toss about that for a long time.

Or say you're a major PC company looking at trialing Linux desktop sales. The settlement means this can't cost you quite so obviously as it did once upon a time, but a decreased level of commitment to Windows can easily still cost you. Don't think, 'I am being punished because I ship Linux machines' - think about close co-operation with Microsoft in the development of new Windows platforms that Microsoft will be pushing hard at peak shipment time. And think about that early shot you get at these sales by being first out of the traps with the new platform by virtue of your early, close co-operation with Microsoft.

Kind of lost interest in that Linux experiment, didn't you, because you're putting so much effort behind your exciting new Windows one, you reckon most people don't really buy Linux desktop machines anyway, so you don't waste money pushing them, so nobody much notices you've got them, nobody much is buying them so, actually, you haven't got them but if somebody asks you could get them in a couple of weeks... Which results in your bottom line 'proving' to you that Linux on the desktop doesn't sell, and there you go, you stop even pretending to sell it and concentrate on pitching to get in early on Microsoft's next 'special edition' platform.

At the moment the one puzzle is HP's recent espousal of Linux, HP having had a couple of these nice early runs. But maybe the company was told it had had enough turns for now. Maybe they're just ungrateful hussies.

Anyway, as I said at the outset, retaliation will be practically impossible to hang on Microsoft, and although process has an equivalent effect, Massachusetts is unlikely to get any further in arguing process through the courts than the previous lot did.

That does not, however, mean that nothing changes. HP aside (at least for the moment, until we see how serious HP really is), Microsoft does not have an immediate problem in keeping the lid on defections by the major PC companies. But while you might think it is chasing imaginary demons by trying to stifle Linux sales by smaller OEMs, that ain't necessarily so. Lindows.com CEO Michael Robertson recently claimed iDOT, one of his major sales outlets, had been on the receiving end of the Microsoft discount process over Lindows sales. iDOT itself made denying noises on this, but it's probably something to do with the way you look at it, and anyway that's not the point.

In the grand scheme of things whether or not small OEMs or systems builders that few people have ever heard of sell Linux machines doesn't matter greatly, but Linux machines that people have heard of are a different matter. iDOT does not spring automatically to the lips of people poised to buy a new PC, but Robertson in his inimitable way has made it his business for more normal people than would ordinarily be the case to have heard of Lindows PCs. Walmart has helped here too, and is now engaged in helping people to hear about Mandrake PCs as well.

So I think I can see the first glimmers of a threat to the Microsoft ascendancy here. Linux PC sales have not worked in the past because they haven't been pushed, publicised, given anything like equivalent airtime to Windows ones; as far as the major PC companies are concerned they've been largely a case of indulging the odd in-house nutter and giving them enough rope to hang themselves.

That will not change until companies chipping away at the edges demonstrate that there is a Linux desktop market, and that by not addressing it properly the big PC companies are losing sales. This oughtn't to be difficult to demonstrate, because practically all the typical commodity PC buyer wants to do can be done at least equally well by a Linux machine. Sure, they don't play the latest Windows games, but their security hole situation is considerably less parlous, they don't do things like try to tell you why DRM is good for you, and - slush funds permitting - they can be cheaper. If it's in the store, or or the site, the sales pitch tells you it does what you want to do, and it's $50 less, what are you going to do?

And it will, surely, get into the stores and onto the sites, not least because the PC commoditisation process Microsoft itself has been driving will increasingly draw vendors' attention to Linux-driven price shaves. Microsoft has it right in seeing the small guys as a threat, at the moment they're a bigger threat than the big guys, and it's perfectly possible that in the very near future there will be to many small guys for it to feasible to process them all out. And what's HP up to, anyway = they serious? Sooner or later, somebody that size is going to be... ®

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