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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: rudedog who wrote (36992)	11/19/1998 8:03:00 PM
From: Roads End	Read Replies (1) \| Respond to of 97611

rudedog...Thanks for saying better than what I have been saying and have known as a simple matter of common sense. "Guys like Dell who keep no inventory and might call in today and want a lot, tomorrow and want a little are a royal pain to a capital-intensive manufacturer like Intel." That is the flaw in their (Dell) model. If chips are in short supply, a model like Dell has falls to the back of the pecking order. If a surplus exists and prices are declining the Dell model is more effective. The key is both those conditions have to be met for the advantage to exist. Ditto any other component required in the finished product. BTW....Have enjoyed the jousting on the MSFT thread. Also, have you considered Yreka Bakery? I like it because it does exist. Steve

To: rudedog who wrote (36992)	11/19/1998 8:59:00 PM
From: Elwood P. Dowd	Respond to of 97611

Thursday November 19 8:38 PM ET Microsoft Considers Yearly Charge For Windows By David Lawsky WASHINGTON (Reuters) - An internal Microsoft memo released at the software giant's antitrust trial Thursday showed the company has considered charging an annual fee to computer users for its Windows operating system starting in 2001. The potentially explosive revelation helps bolster government charges that Microsoft's monopoly in operating systems harms consumers. The memo to Microsoft Chairman Bill Gates from a top executive said the proposal to charge consumers annually was ''the best thing long term'' and noted: ''We have increased our prices over the last 10 years (while) other component prices have come down and continue to come down.'' The federal government and 20 states have charged that Microsoft Corp. (Nasdaq:MSFT - news) illegally maintained its monopoly in operating systems and used that monopoly to compete unfairly against Netscape Communications Corp. (Nasdaq:NSCP - news) in the market for Internet browsers. Joachim Kempin, Microsoft's senior vice president for sales to personal computer makers, used the three-page memo to lay out a strategy that would preserve the company's prices even as PC prices plummeted, but he was also concerned the company could go too far and foment a rebellion among computer makers. The December 1997 memo looked to consumers as a new revenue stream. Until now, consumers purchasing new computers have gotten the Windows operating system wrapped in, without paying a separate fee. Kempin's memo proposed changing that under the heading, ''License for limited time and create annuity business.'' ''This is the best thing long term but it might disrupt end user operations and could require end user registration,'' Kempin wrote. Kempin reminded Gates that he had made the suggestion before and added that it needed to be seriously addressed. Kempin wrote that charging the annual fee was not an option until 2001, when a new version of Windows is expected. Microsoft spokesman Mark Murray, asked afterward about the memo, said: ''This is not a licensing option that is near reality. It is simply an idea that is thrown out there to look into.'' The December memo was used by a government economics expert, Frederick Warren-Boulton, to support his allegation that the software giant had monopoly power and could raise prices far above what it could charge if it had competition. ''I believe Microsoft has raised prices above competitive levels by a significant amount,'' Warren-Boulton said in court. Kempin's memo projected that if the trend toward cheaper computers continued toward the $500 level for Christmas 1998 -- and this month some complete systems are selling for less than $600 -- ''our royalties... could be as high as 10 percent of total system price.'' Kempin said that Microsoft must ''resist... royalty price decreases firmly'' for the low-priced machines. He said the company's goal was to get the ''highest amount of dollars'' possible from computer makers for loading Windows on their machines. But the memo also expressed fear that Microsoft's high prices might incite action by the nation's biggest personal computer maker to create a competing operating system. ''Our high prices could get a single OEM (Compaq might pay us $750 million next year) or a coalition to fund a competing effort (say in India),'' he wrote, referring to personal computer makers as original equipment manufacturers or OEMs. One place that Kempin looked for a new flow of cash was personal computer owners. Kempin devoted the last page of his single-spaced memo to concerns about who might be able to derail Microsoft's plan. Kempin, after considering the threat posed by a coalition of PC makers led by Compaq Computer Corp. (NYSE:CPQ - news), dismissed it by saying he doubted they could market the product successfully. Kempin also doubted that computer makers would be willing to sell machines without Windows or another operating system. ''Who would want to start with this and lose business?'' he asked. Kempin also expressed concern that Sun Microsystems and Netscape might team up, but said that the ''compatibility barrier'' stood in the way. Warren-Boulton testified Thursday that incompatibility with other systems had prevented competition. Microsoft's lawyer, Michael Lacovera, suggested that the Linux operating system provided competition. Linux is a variant on the UNIX operating system and is used mostly by computer servers. But Warren-Boulton dismissed it, saying Linux had not constrained Microsoft's prices. Kempin also raised concerns that Intel, which makes the chips that run most Microsoft Windows operating systems, could emerge as a competitor. He predicted that if Intel decided to go down that road, ''it will get ugly.'' Warren-Boulton agreed on the witness stand that Intel would be a special case. ''Intel could enter the operating system market and if the price of operating systems dropped, it could raise the price of the chips,'' said Warren-Boulton. ''It is a potentially dangerous entrant.''