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Thailand's cheap PCs 'force Microsoft's hand'

John Lui CNETAsia

Published: 22 Aug 2003 12:20 BST

The Thai government's scheme to bring cheaper computers to low-income earners could have the unintended side effect of cracking Microsoft's hallowed one-price policy, says an analyst.

How a simple welfare scheme in a Southeast-Asian country could tweak the nose of the world's largest software company was explained by Dion Wiggins, a research director with Gartner Hong Kong.

Today, a copy of the Microsoft Windows operating system or Office productivity suite costs roughly the same in every country. For example, Windows XP Home is $199 (£125.77) and Office XP, $399. Given that the income of a Thai worker is $7,000 a year, it would be the equivalent of charging $3,000 for the bundle in the US, he told CNETAsia.

The giant from Redmond at first declined to take part in the low-cost PC programme run by the Information, Communications and Technology (ICT) ministry: there was no way to sell a PC with Windows and Office on board and keep within the target price of $250. The open-source Linux operating system was the only option left, and the desktops sold in large numbers.

"Now with the recent appointment of a general manager in Thailand, Microsoft has belatedly realised the potential of one million ICT PCs running Linux and decided to participate in the program," said Wiggins.

And with more PCs in more homes, the piracy problem suddenly got bigger. Most buyers are likely to replace the Linux OS with a bootleg copy of Windows, he said.

Microsoft caved in, offering Thai language versions of Windows XP Home and Office Standard Edition for a mere $40 extra.

With the genie out of the bottle, two other Asian governments are now seeking advice from Gartner about a low-cost PC programme of their own, he said. He declined to name them.

"Because of ongoing price pressures, backlash against Microsoft, and programs similar to the Thailand ICT PC program, Microsoft will have to provide more competitive pricing globally," he concluded.

He predicts with some certainty that by the middle of next year, Microsoft prices in developing countries will be halved.

"Some markets may even see adjustments as early as year-end 2003," he said.

"Microsoft must adopt a strategy for emerging economies like Thailand that will combat piracy and increase Windows sales. Without paying attention to these markets and addressing their needs better, the market share of PCs shipping with no operating system or Linux will grow, adding to the piracy problem," he added.

Wiggins's views are published in the Gartner commentary "Thai PC market may change global Windows landscape", co-authored by analyst Martin Gilliland.

Microsoft told CNETAsia that it disagreed with the report's conclusion of a major pricing policy change resulting from events begun in Thailand.

"We were disappointed in the Gartner note overall, as it seems it to be at odds with what we are seeing in the market and draws some conclusions we believed unwarranted by the market data," said Ahmed Chami, Microsoft's president for South-East Asia, in a written statement.

He also did not share the view that Microsoft's participation in the scheme was driven in part by an anti-Linux strategy.

"When we heard about the Thai government ICT program and realised we could support it even further by offering the people a choice in software, we felt it was important to be involved. It was a great opportunity for us. It was very exciting and matched our vision too," he said.

Microsoft has no plans to expand the discounts to other countries, he added.

"However, Microsoft is committed, globally, to furthering development and encouraging individual innovation through technology. We are always willing to discuss with governments how we can help bring the value of Microsoft products, and working together to provide better access to technology for the disadvantaged," he said.