By Winston Chai
Tuesday, March 02 2004 04:53 PM
URL: http://www.zdnetasia.com/news/business/0,39044229,39170268,00.htm

update Mirroring similar efforts in Thailand, Microsoft announced a cut-price software package as part of a government-led drive to increase computer ownership in Malaysia.

The Redmond, Wash-based software giant has unveiled a customized, Malay-language version of its Windows XP Home Edition which will be bundled with all new computers under the Malaysian government's new "PC Gemilang" project.

Launched by authorities earlier today, this initiative aims to raise PC penetration rates in Malaysia from about 15 percent currently to 35 percent over the next two years. To achieve the goal, the Malaysian government has tasked Pikom, a local IT association, to develop a low-cost desktop for the masses, said Butt Wai Choon, managing director of Microsoft Malaysia.

Pikom's budget PC features an Intel Celeron 1.7 GHz processor, 128MB of RAM, a 40GB hard drive, a 15-inch CRT monitor and peripherals such as a mouse, keyboard and speakers.

Pricing for the desktop depends on the choice of operating system (OS) and accompanying software. The Windows version, coupled with Microsoft Work Suite 2004 --a scaled-down set of productivity tools for tasks such as word processing and spreadsheets--will retail for RM$1,147 (US$302) while those running a Linux OS and Open Office will cost RM$998 (US$263).

"In this program, we are able to bring the price to a point to fit the local market because it is a localized version. For the international English version, it's a set global pricing and it's very difficult to have one country with a different pricing from another," Butt told CNETAsia.

He did not reveal the exact cost of the Malaysia-only software package. However, an English version of Windows XP Home Edition and Office XP retails for about US$199 and US$399 respectively. This means the base price of the modified Windows OS and Work Suite bundle would have to be significantly lower than its English counterparts to meet Pikom's US$302 price tag.

Citing predictions by Pikom, Butt said up to 100,000 such PCs are expected to be sold across the country. The association is in the process of selecting the component suppliers, assemblers and distributors for these desktops, and several local firms have already been short listed, he added.

One price to rule them all?
Microsoft's latest announcement confirms market speculation that the firm may launch stripped-down, low-cost versions of its software for other governments following its initial compromise in Thailand.

Last June, the software maker joined the Thai government's budget PC program by offering a local flavor of Windows XP and Office for about US$40. The project had previously focused solely on Linux and open-source software.

This move prompted market research firm Gartner to make the bold prediction that Microsoft could change its one-price policy and be forced to halve prices in poorer countries by the middle of this year. Microsoft has since disputed Gartner's findings, saying its universal pricing will remain, although the firm may make adjustments when it comes to special educational or government-led initiatives.

Besides the open-source threat, Gartner believes piracy was the other key impetus for Microsoft's latest concession in Malaysia. The country, along with Thailand and other Asian markets such Indonesia and the Philippines, has been under constant scrutiny by intellectual property rights groups around the world for being breeding grounds for pirated material.

"This is clearly an attempt to get people to buy legitimate copies of Windows. They have tested this strategy out in Thailand and are comfortable with the way it works," said Martin Gilliland, principal analyst for Gartner Asia-Pacific.

"This is profit they (Microsoft) otherwise wouldn't have normally made," he said, referring to the ready availability of bootleg substitutes for Windows and other Microsoft products in Malaysia.