May 21, 2006 9:00 PM PDT
Microsoft pitches pay-as-you-go PCs
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That's basically the idea behind FlexGo, Microsoft's latest attempt to make PC ownership more accessible to people in emerging markets.
Under the idea, which Microsoft is introducing this week, people would be able to get a PC for their home with a mechanism that charges them depending on how much computing they use. Consumers would pay for about half of the PC upfront and then, say, 50 cents or 75 cents per hour of use. After several hundred hours of paid use, they would then own the PC outright.
The exact finances of the program would vary, depending on a number of factors. These include the cost of the software and hardware being used, as well as the country's prevailing lending interest rate. Microsoft has already tested the idea in Brazil, but plans to expand that program in coming weeks, alongside new trials in Russia, India, China and Mexico.
Microsoft has been grappling with the challenges of emerging markets for some time. The company has offered a lower-priced operating system option, its stripped-down Windows XP Starter Edition, as part of low-cost PC programs across the globe. But total shipments of Starter have been modest, with the company having sold 100,000 copies as of last July.
But while Starter is aimed at people who may never have used a computer, Microsoft said the target customer for FlexGo is someone who has used Windows before--at work, school or an Internet cafe, for example--but has not been able to afford a similar machine of their own.
That way, Wickstrand said, consumers are "paying for a PC that they want and not a PC that they had to settle for."
"The real goal of FlexGo is to make that dream of owning a full-featured PC a reality," he added.
In many cases, Microsoft has already worked with local governments and businesses to offer financing programs in which consumers pay a monthly fee for their PC. But one of the things Microsoft said it has learned is that many people in developing countries do not have a steady income. With FlexGo, consumers can scale back their PC use in months that they have less money, rather than having to default on their purchase.
"One of the learnings that we've had is that it's not just that families in emerging markets have modest budgets," Wickstrand said. "It's the irregularity and unpredictability of their income."
In many places, people want to use PCs, but can't afford it, and there are insufficient financing options, said Willy Agatstein, general manager of Intel's emerging markets platform group.
"If you go to Brazil, people buy movie tickets on credit, but the PC infrastructure is not that developed," Agatstein said.
Wickstrand said that the idea behind FlexGo is to make computing more similar to the way other technologies are bought in emerging markets. More than three-fourths of cell phones are bought using prepaid minutes, he said.
He pointed to India, where five years ago there were only 5 million cell phones. "Today there are 90 million, (and the number is) growing at 5 million a month," he said.
"Certainly the cost of handsets coming down is one component," of the growth, Wickstrand said. "We believe the much bigger component was this prepaid model."
Intel, which has considerable emerging markets efforts of its own, is among the chipmakers helping out with some of the secure hardware needed to make the system work. For example, the PC should have a secure clock and other circuitry to ensure that the system can bill for use and shut down if it's not being paid for.
Rival Advanced Micro Devices said it intends to develop processors designed specifically to support FlexGo, and Transmeta said it, too, has a processor and reference design that are aimed at such PCs.
In addition to the financing challenges, there has also been considerable debate over what the best design is for a low-cost PC, with the Massachusetts Institute of Technology touting its $100 PC and others pitching alternative PC designs or even cell phones as possibilities.
Unlike Intel's existing low-cost PC for emerging markets, which has all but the computing essentials stripped out, a system tailored to FlexGo needs some hardware added in.
Agatstein said that Intel is still trying to put an exact price tag on the added requirements, but said "it's in the dollars range, not in the tens of dollars range."
Although much of the effort behind FlexGo centers on the prepaid model, Microsoft is also going to see if it helps with subscription PC sales, where people pay a fixed monthly fee. With the FlexGo technology, the PCs of those that stop paying could be shut down, not an option when traditional PCs are financed.
The company said it plans to try out subscription-based approaches for FlexGo in Vietnam, Hungary, Slovenia, India and Brazil.
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