March 24, 2004 12:16 PM PST

Business as usual for PC makers

The European Commission's antitrust decision against Microsoft is unlikely to change the tune of PC manufacturers when it comes to Windows Media Player, going by companies' first reactions.

The decision, handed down on Wednesday, calls for the software giant to create a version of Windows without Windows Media Player for European customers within 90 days. Right now, Microsoft bundles the multimedia application with the operating system, which is installed on new PCs at the factory.

Initial reactions from some PC makers suggested that they would either go on with business as usual or take a wait-and-see attitude to the decision. Given the cutthroat market for desktops and notebooks, PC makers are only likely to offer a stripped version of Windows if they feel it gives them an edge, such as a price advantage, analysts said.

The commission's ruling prevents Microsoft from charging a higher price for Windows without the media player and from making the unbundled OS unattractive in other ways, such as by hampering its performance. However, a summary released by the EU agency on Wednesday does not spell out whether Windows should cost less without Media Player. It does not require the software maker to stop selling the OS-media player package in Europe.

In effect, the decision hands PC makers the option of not having Windows Media Player on their desktops and laptops, or of replacing it with a competing multimedia product. As such, it presents an opportunity for RealNetworks' RealPlayer software and for Apple Computer's QuickTime. But it looks likely to have a minimal effect on computer manufacturers.

"From my point of view, I don't see any major change for Acer. I think we'll continue to bundle Windows Media Player" on new PCs, said Gianfranco Lanci, the president of Acer's EMEA division, which includes its European operations. "My first feeling is that I don't see any major impact for a PC (company) today in Europe," Lanci said, though he noted that he hadn't seen a copy of the commission's final judgment.

Fujitsu-Siemens, Western Europe's third-largest PC maker in unit sales, will continue its regular practice of consulting with its customers on which software it installs on its systems at the factory, company spokeswoman Amy Flecher said.

"Due to the contract we have with Microsoft, we're able to preinstall or not preinstall the media player," Flecher said. "So (the ruling) doesn't change anything."

It's likely that PC makers will stick by their first reactions, analysts suggested.

"It's not going to make any difference to them," said Jeremy Davies, an analyst with Context, a London-based firm that tracks PC sales. "They're always looking out for an edge where they can sell something cheaper. Does having Media Player matter??Whatever Microsoft does, they'll just roll with the punches."


Commentary
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against the software maker
represents at best an annoyance to
Microsoft, not a genuine barrier--even
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Several other PC makers, including Hewlett-Packard, Dell and IBM, said on Wednesday that they were still evaluating the decision.

"We're going to look at all of our options for our customers. We want to outfit our products with the tools that are required for customers to play their multimedia files," said Dell spokesman Venancio Figueroa.

Right now, Dell installs Windows XP with Windows Media Player on the PCs it sells in Europe. Like Fujitsu-Siemens and Acer, it does not preinstall RealNetworks' competing media player software on the computers it sells there.

A Packard Bell representative declined to comment. Packard Bell is NEC's consumer PC brand in Europe.

Net impact
If PC makers were to abandon Media Player in the region, it could leave a mark. Of late, Western Europe has accounted for roughly one-quarter of the world's yearly PC shipments. During 2003, manufacturers shipped about 36 million units in Western European countries, out of a total of just over 154 million units shipped worldwide, according to research firm IDC.

This year, IDC predicts that PC unit shipments in the region will increase by 9 percent to 38.8 million. Worldwide, it expects PC shipments to reach 172.1 million units in 2004, an 11.4 percent increase over last year's total of 154.5 million.

Last year, Hewlett-Packard held the largest Western European market share with 21.3 percent. Dell followed with 12.5 percent, while Fujitsu-Siemens had 8.9 percent and Acer had 7 percent. IBM and NEC racked up 5.9 percent and 4.6 percent respectively, according to IDC.



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Even if Windows Media Player lost its place on the large number of PCs sold in Europe, consumers would be likely to download Microsoft's multimedia player anyway, according to some analysts. Many music and video files on the Internet are in the Windows Media file format and can only be played using that software, Gartner analyst Lou Latham noted.

The most recent audience data from research firm Nielsen/NetRatings shows Windows Media Player in the lead in Europe, although many people also use RealNetwork's RealPlayer and Apple's QuickTime and, in some cases, content providers offer audio or video in all three file formats.

In February, Windows Media Player drew about 36.5 million unique viewers and captured between about 30 and 40 percent of the available audience in France, Germany, Italy, the Netherlands, Spain, Sweden, Switzerland and the United Kingdom, according to Nielsen/NetRatings data. RealPlayer captured about 11.6 million unique viewers and reached between 7 percent and 15 percent of the audience. QuickTime had about 10 million unique viewers, about 7 and 14 percent.

"If Windows Media Player?was pulled out, what would suddenly stop happening? It's hard to tell, because people can still download it," said Greg Bloom, a senior analyst at Nielsen/NetRatings. "From my vantage point, I can't say that things will dramatically change the day after."

The impact of the EU decision will be measured against that of the settlement in the U.S. Department of Justice's antitrust case against Microsoft, which granted PC makers the flexibility to delete or replace Microsoft software such as the Internet Explorer browser and to change various icons on the Windows desktop. It also allowed them to install user interface software that works on top of Windows.

While manufacturers continue to bundle the IE browser for the U.S. market, most have now changed the look of their Windows desktops by adding more icons, many of which have nothing to do with Microsoft. For example, Dell installs the Dell Media Experience on its Dimension desktops and Inspiron notebooks. Customers can choose whether to use the special user interface, which allows people to quickly access and play music, view photos and watch movies, as their main interface, according to the PC maker.

While the initial impact of the commission's ruling on PC manufacturers' approach looks to be minimal, the decision is still expected to set a legal precedent against software bundling in Europe for Microsoft. That precedent could affect the way Microsoft offers future versions of Windows, analysts said.

 

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