Dell, prisoner of the Beast of Redmond

Linspire chief lashes out

By John Lettice, 3rd September 2004

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Dell has a long history - regularly documented in these pages - of not quite getting behind Linux on the desktop. Dell Linux machines do pop up every now and again, but what desktop efforts there are find themselves first consigned to obscure corners of the operation, then disappeared, no doubt because of lack of demand. Why is this? One can surmise that Dell's closeness to Microsoft has something to do with it, but one now has less reason to merely surmise, because Linspire CEO Michael Robertson has broken cover with a few claims, and a few numbers.

Microsoft soft money "kickbacks", he estimates, could account for up to $200 million, "or more than 25 per cent of Dell's profitability." Writing in his regular email to Lindows/Linspire users, Robertson gives two examples of what happens to Dell-related Linux efforts. "Dell recently invited two top executives from Linspire to give some presentations about desktop Linux. They wanted to know where it's at and where it's going. We confirmed meeting dates, attendees and flew our two executives to Austin. Higher up Dell executives found out about these meetings the day before and abruptly canceled them."

He also cites the Questar case, where an attempt to sell Dell computers with Linspire preinstalled was, he says, cancelled at the behest of Dell US executives.

Par for the course? But what is it that makes Dell do this kind of thing? Robertson puts forward some interesting numbers. The antitrust deal between Microsoft and the DoJ requires that Microsoft sell Windows to the top 20 PC OEMs at the same price, thus theoretically removing the possibility of sweetheart deals. But the sale price isn't necessarily the effective sale price. Says Robertson: "Microsoft gives kickbacks to vendors based on the number of computers they sell. Estimates of these range from $2-$10 per computer. Dell also has a sweetheart deal on Microsoft Office licensing which gives them a competitive advantage over other OEMs, helping them win the pricing game. (The anti-trust ruling did not address Microsoft Office pricing.)"

Dell also gets Microsoft money for recommending Windows XP under the Market Development Program (MDP), which gives it three different sources of money where it's beholden to Microsoft's goodwill. Robertson estimates that could average out at $30 per computer, which on Dell's base margins would be enough to make any exec sit up and take notice.

Robertson concludes from this that there's no chance of Dell leading the charge to desktop Linux (sure as hell not with Linspire after this little effort, Michael), and optimistically says the break is going to come via companies chasing Dell and looking for a competitive advantage. But if he's even half right about the numbers, it seems inevitable that Microsoft still has more than enough leeway to play the old PC company favourites game the DoJ deal was supposed to put a stop to. Which means it'll be pretty difficult for any of the major PC companies to break free. (Robertson's email in full) ®