A software licensing agreement signed recently between Microsoft and a global PC ragtrader has proven that the software giant is willing to bargain.
This follows a report that the software vendor's actions threaten to destroy the refurbished PC market (ARN July 28, page 1). ARN has learned that US-based PC remarketer R Frazier has negotiated an arrangement with Microsoft to load its Windows operating system on around 50,000 PCs destined for the education market in the Netherlands for a fraction of the regular cost.
According to informed sources currently investigating opportunities in the remarketed PC business, Microsoft has negotiated a special rate for the licensing deal with R Frazier.
One source claimed the price per box charged by Microsoft was as low as $US15. This, he claimed, came in response to the possibility R Frazier would ship the PCs with an alternative operating system such as Linux. Microsoft's Australian OEM sales manager, Dave Wrathall, expressed doubt about the Netherlands deal, saying: "It dumbfounds me and I'd be very surprised if the subsidiary in that country was virtually giving Windows away."
He maintained that Microsoft just wanted to do the right thing by the customers and the company. But as it now stands, several industry players believe the future of the remarketed PC trade hangs in the balance.
"There is a huge demand for cheap second-hand PCs, but the concerns about software legitimacy make it too difficult and price prohibitive," said another Sydney-based reseller.
Used PC dealers say this plan makes the PC ragtrade business untenable. One explained that if any wholesaler pays around $100 for a used PC and then has to pay an extra $130 for an operating system licence, the sell price to the customer will not be attractive enough.
Ran McDonald, general manager for RentWorks Remarketing, reports that it alone has remarketed around 60,000 brand name PCs over the last two years. "These are PCs for which we have the original invoices and equipment schedules, but less than 5 per cent of our clients return the original documentation or media," he said.
And, according to Tony Nestola, general manager of Global Remarketing, a division of the Volante Group, they are turning over 4000 refurbished PCs per month in an arrangement with IBM Credit. But he said that after raising the licensing problem with Microsoft 18 months ago, they have elected to sell the PCs "naked"; that is, without their original operating systems.