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07.15.09

Leaked Microsoft Slides (2003): How to Win Against GNU/Linux

Posted in Antitrust, Apple, GNU/Linux, Microsoft, Windows at 11:08 am by Dr. Roy Schestowitz

Summary: Microsoft’s recognition of the GNU/Linux threat as shown in its internal, confidential presentations

WE have mountains of antitrust exhibits to show — material that never reached any public attention because Microsoft settles quickly and buries evidence as part of the settlements. Today we deal with Comes vs. Microsoft Exhibit px07378 (2003) [PDF], from which wallclimber has managed to extract and reconstruct the main slides (high-resolution PNGs below). She could not salvage the entire text, but it was more than workable.

Internal documentation (intelligence) such as this proves truly valuable because it shows just how afraid Microsoft is of GNU/Linux, which Bill Gates calls the most potent competitor in operating systems. Apple is still a niche which targets mostly rich people, so surveys in developed countries alone do not tell the truth. In fact, in a recent presentation Steve Ballmer showed that globally, on the desktop, GNU/Linux market share is said to have exceeded Apple’s.

There are many interesting portions to show in this latest exhibit, but here is some good material on GNU/Linux. From 2003 “IMPERATIVES” for example (highlight in red is ours):

FY 03 IMPERATIVES

* Drive Revenue & XP Excitement
- Promote XP Software, Establish Products, Push to Professional+, Win Emerging
* Turn the corner on Longhorn
- Builds, alignment, execution
* Earn the Trust of Our Customers, Partners, & Government
- Community, closing the loop, compliance with SRPFJ
* Win against Linux
- Government, education, emerging
* Invest in the Ecosystem
- Metrics, roadmap, leadership
* Develop People & Organization
- Hires, communication, cross group, manager span, training

Challenges & Discussion
* Winning Against Linux: government, education, enterprise, embedded
* SRPFJ: OEMs hiding our innovations; Work to deliver, & comply
* Dry spell coming in FY04 – revenue, annuity, competition
* Emerging markets plan – Linux, other OSs, and piracy: ideas welcome
* Improving sick ecosystem – quality, innovation, profit
* Product segmentation – how many “premiums”?
* Finding the right balance on legacy support
* Making customer trust/connection a part of the culture
* Piracy: How to make progress (and yet balance with Linux)

In the part about “COMPETITION”, GNU/Linux comes before Apple and they use the TCO lie to fight against GNU/Linux.

COMPETITION
Linux: Win in edu/gov’t/emerging, prove lower TCO
Apple: Partner w/ISVs/IHVs on scenarios, win digital media reviews/leadership
Real: Maintain lead, broader/profitable ecosystem

A lot about media, DRM and also Palladium (Trusted Platform Module) is included in the full exhibit, which can be read as PDF or plain text below. A few slides were not reconstructed due to reading difficulties (the text is sometimes illegible due to scale, so reference to the original is better than a deficient translation).


Appendix: Comes vs. Microsoft – exhibit px07378, as text



________________________________________________
[Graphic: "OEM & HW Manufacturers" goes here]

Key points to make
Innovation part of step function to drive needed volume

MS is the only one who cares about Windows-centricity

To rally industry around needed bold Innovaton, we need to message roadmap *much* earlier

While ODMs are a design aggregation point, we would prefer they not become a licensing aggregation point

OEMs play a different role than in the past – they now consist of channel partners and other PC brands and fulfill the role of customer touch rather than that of the platform innovator, however, technical engagement Is still required to create needed pull to ODMs.

Drive innovation for PC churn/market expansion/penetration
Investments in quality such as OCA increase Windows value proposition to partners, end users

Investments in bold innovation to surf inflections

After market should not be an after thought. In conjunction with innovation we need to address aftermarket/incremental revenue streams in product development process

Make for frictionless Windows integration, increasing Windows criticality

Operating Margin chart
Compaq: O.M. as reported by Compaq for its Access Business Group (commercial and consumer PCs, workstations, and handhelds)
Dell: O.M. for commercial and consumer desktops, portables and workstations
HP: Figures reported by HP for its personal and embedded systems group
IBM: IBR estimates for IBM’s PC business. we have removed the printing business from IBM’s personal systems and printing group figures

Forward vertical integration
Smaller ODMs are going direct to end users in targeted regions like Taiwan, larger ODMs don’t want to compete directly with their customers
Current turnkey or “no touch” ODMs: Wistron, Compal, Quanta, ECS

Progress on OCA
OCA crash fixes tracking at 26% (goal 33% by SP1)
From OCA crashes determined Dell was still shipping old nVidia image, causing 70k blue screens a month; working with Dell to fix

OPK improvements
On track for covered OEMs
-Componentization of the OS for ease of image creation, install and distribution
-Imagability of the OS (both online and offline configuration) for creation, modification, and testing of the image
-Full scriptability of the manufacturability tools suite complete with an SDK (Incl WinPE, Storage mgr, and updated scripting tool WH)
-Total OS hardware independence (1 image for all models)
-Reduction in the number of required SKUs/Images (HE/PRO become switches, Languages become optional components and hardware independence goes away with HAL PnP)

Additional examples of a much-needed OPK improvement
-Automatic download of the latest QFEs which are seemlessly integrated into the preinstall process
-Potentially have web “offers” that the OEMs can integrate into the preinstall from 3rd parties as well

Security/data protection after market programs suggestions
-anti-virus packs
-Palladium-related services
-cross firewall management services

Home networking
-Upsell of remote management
-Management SW
-Physical needs (note that UI will make the OS networking aspect transparent)
-Demand marketing to push to high touch environments like Gateway stores, Best Buy etc.

Two ways to address IP Pooling.
1.Participate in industry pool where everyone pays to enter and then per unit cost. Not a good solution for Windows integration, but reasonable for a plus pack format. OEM channel would need to be set up to address integration of pack offerings.
2.We create the pool, offer TTM advantage, fee to enter for non-participants

30

Plaintiff’s Exhibit
7378
Comes v. Microsoft

MS-CC-Bu 000000180667
HIGHLY CONFIDENTIAL


[Graphic: "Software Developers" goes here]

Software Developers

______________
[rectangle top left]

SOFTWARE DEVELOPERS

Situation Analysis

Lack of new investment in Windows client code
No killer Windows XP apps/solutions
Corporate trend away from client code
Trending to “dumb clients” is slowing/reversing
Competitors in rich client space growing
Macromedia Flash, Java
Unclear adoption trajectory
Continued decline of retail SW, enterprise client deployments

[rectangle top right]

FY ’03 Strategy & Big Bets
Short Term
Targeted efforts around Tablet and eHome
Continuing w/ NET FX evangelism
Enhancements to Windows Catalog
ISV portal close the quality feedback loop

Longhorn Plan
LH API is 100% managed code (exposed)
Cohesive strategy built on NET to leapfrog competition reinvigorate client development
Need to attack both technology and business model issues for ISV market
Hardware acceleration requires quantum eap in IHV investment and stability
Growing from Corp/LOB to ISV and Web Apps

[rectangle bottom left]

Taxonomy

End-user

Pro ISV
MGI, Corel, Adobe,
Intuit, Symantec
Freeware and
shareware

Siebel, SAP,
Reuters, ABB

Corp
Schwab,
Barnes &
Nobles,
Ford

Corp IT
apps
MSMARKET, etc

Web
Amazon, E-
bay

[can't read
this entry]

Content
Encarta,
CNet
Yahoo
Lycos
Google

Gartner,
Dow Jones,
Source One

Games
& Ent
xxxxxgamer,
Electronic
Arts,
xxxxxxxx,
Disney

[rectangle bottom right]

Next Steps
Events
LH API Owners Offsite May 23/24 (brada)
LH API Design preview end-September (lenop)
PDC in April ’03 (MCG/charlesf)
Risks
Align CLR drops with major LH dates (encr)
Align storage integration/deliverables given recent reorganization/refocus (pcelis)
Set strong date/priority message across teams (jimali)
Investments not being made
New Win32 or Trident work

Microsoft Confidential
6/12/2003
FOR INTERNAL USE ONLY
31
______________________

Top 3 takeaways for bpr
1. Work in short term is minimal and not about new api’s — more about marketing/positioning. Even w/tablet and ehome, these are niche efforts for small segments of developers.
2. Longhorn API effort is all about managed code exposure. This creates conflict w/the “legacy” teams such as office, who want an unmanaged (exposed) solution, and solutions for issues like management/delivery for unmanaged code as well.
3. The CLR focus must move from LOB/Corp to also include Pro-ISV (ms internal as well as external consumer ISV) – this is a change and a challenge

31

MS-CC-Bu 000000180668
HIGHLY CONFIDENTIAL


[Graphic: "Networking & Infrastructure" goes here]

Networking and infrastructure

______________________

NETWORKING & INFRASTRUCTURE

[top left rectangle]

Situation Analysis

Always-on wireless and broadband networking Paradigm shift to wide band wireless packet data Connectivity hampered by complexity, security, address shortage Optical technology leading to gigabit networking Broadband deployment stalled, blocked by lack of demand due to cost and lack of compelling scenarios Home networks still very difficult IM pervasive IP becoming signaling backbone – Carriers shifting to VoIP P2P applications spreading fast Enterprise Conferencing growing rapidly

[top right rectangle]

Big Bets

Secure end-to-end transparent communications
– Authenticated, authorized, private and tamper proof communications between Windows systems
- Implement Dist. RWs & IPv6 in end systems, Solve FW traversal
Wireless
- Always-on Nomadic (Wi-Fi, WAN, Wired) networking Roaming, Location, QoS, Power Management, soft Wi-Fi
- Monitor & stimulate Wi-Fi hotspots everywhere: Public, Guest
Communication and Collaboration
- Establish Windows as the infrastructure platform for RTC
- Enable presence-based multi-party multi-modal data conf
- Telephony integration using SIP
- Improved audio/video quality
Ease of use and diagnostic enhancements
- Reduce support calls and enhance user satisfaction by diagnosing & giving directed, actionable feedback to the user
- Simplify Broadband Deployment; Painless internet connection, file sharing in the home

[lower left rectangle]

Key Ecosystem Metrics

Secure end-to-end transparent communications
-Easy to deploy end-to-end security xx/xx Firewall/NAT issues
-Get adoption of MS Client technologies IPv6 VPN DFW

Wireless
-All laptops enabled for dual-band Wi-Fi,
-90% of enterprises deploy Wi-Fi use 802 1X -Wi-Fi/WAN offering from a carrier in a very convenient

Communications and Collaboration
Every PC ships with usable microphone and optional camera
Every PC can have a phone number
80% of collab. apps. use Windows RTC/P2P APIs

Ease of use and diagnostic enhancements
Reduce device related ODH issues by 50%
Eliminate PSS calls w/r/t ICS & File sharing scenarios
Windows Diagnoses 80% of network related failures

ISV
ISP
IHV
NEP
OEM

[lower right rectangle]

Risks/Issues

Blocked scenarios due to no clean short term firewall traversal solution
Down-level platform support to drive adoption of new protocol initiatives.
Resource shortage to pursue full plan given industry/technology trends. Particular concerns in Wireless, Networking ease of use, diagnostics
Wi-Fi Hotspot efforts fragmented
-Lotus SameTime, WebEx reach critical mass before MSFT is competitive Ecosystem Investigation
Driving Enhanced distributed Service Provisioning on MSFT platforms

MICROSOFT CONFIDENTIAL 6/18/2003 FOR INTERNAL USE ONLY 32

______________________

32

MS-CC-Bu 000000180669
HIGHLY CONFIDENTIAL


[Graphic: "Digital Media Ecosystem" goes here]

33

MS-CC-Bu 000000180670
HIGHLY CONFIDENTIAL


[Graphic: "Digital Media Ecosystem Summaries" goes here]

digitalmediaecosys-summaries-small

______________________

DIGITAL MEDIA ECOSYSTEMS SUMMARIES

[top left rectangle]

Content

Situation
$60B Industry threatened by file sharing / piracy
Legislation & Copy protection drive content away from PCs
Exponential growth in DM fueled by music
Explosive DVD player & media sales
Challenging business model for streaming media
RealOne projected to hit 1M subscribers at CY02

FY03 Strategy & Big Bets
Ensure Windows is central and valuable for content qwners
Develop and promote subscription services based on WM
Corona, Palladium
Engagement in policy efforts short term, standards long term

Investments not being made
Improved/competitive DRM for entertainment pre-longhorn
Exclusive content rights and/or aggressive subscription offering

[bottom left rectangle]

Pro/Media ISVs/IHVs

Situation
$8B industry migrating to more affordable, PC-based systems
Expanded opportunity for Windows partnerships in response to competition from Apple
Standards, Gov. mandates & non-MS DRM and CA

FY03 Strategy & Big Bets
Grow the beachhead with Corona
Hardware assisted encoding for real-time broadcast
Continue to move upstream in content creation
Investigate format alternatives for professional editing,
interchange and archive (AVI, WAV, AAF)

Investments not being made
Professional mastering

[top right rectangle]

Infrastructure
Situation
Broadband subs forecasted to grow >1000% to 130M by 05
Entrenched players and standards
Global consolidation, commoditization and heavy debt

FY03 Strategy & Big Bets
Win reference accounts in DSL, cable VOD
Move CDNs caching vendors from xNIX to Windows
Partner with outsourcing providers on NET services

Investments not being made
Not building a VOD solution
Not building a content management/CDN solution

[bottom right rectangle]

Consumer Electronics

Situation
CE Industry projected up 3% to $98.7B for CY02
Entrenched and emerging standards – not PC friendly
DVD upsurge
ABM partnerships (Sony/Nokia/Real/AOL)
Immature business models in VOD / Wireless Media
CE Industry driving for home network control
Commoditization / loss of IP control by CE companies (e.g. Phillips)

FY03 Strategy & Big Bets
Ensure PC is central component in managing digital media on CE devices
Ensure Windows provides enhanced DM experience for all connected devices
Drive format and DRM adoption

Investments not being made
Wireless Media Business Models & Standards Participation
Media DRM stalled. No CA interop story yet
Windows Media Brand development/broad WMA awareness
PPC / Stinger Media Player

MICROSOFT CONFIDENTIAL
6/18/2003
FOR INTERNAL USE ONLY
34

______________________

WW Sales of recorded music fell 6.8% last year
1.6B consumer spend on burners, blank CDs & digital media players

Content sourced through file sharing and ripping v. subscription
-Downloading music is number 1 digital media activity
-Morpheus/Kazaa users >7M v. RealOne ~600K

34

MS-CC-Bu 000000180671
HIGHLY CONFIDENTIAL


[Graphic: "FY03 Non-Financial Targets" goes here]

Non-financial

______________________

FY03 NON-FINANCIAL TARGETS

[top left rectangle]

THOUGHT LEADERSHIP/PERCEPTION

Maximize impact of Tablet PC, Freestyle, and Mira in FY 03
Knowledge workers (reading, annotations, collaboration)
Consumers (digital media, home network)
Developers (managed code, storage, presentation, programming model)
Communications (wireless, RTC, peer to peer)
DRM (software, content)
PC Hardware (quality, innovation, low cost)

[middle left rectangle]

SHARED BETS

MSN 8 (MSN)
Longhorn (Office, Server, MSN)
Developer Platform (Visual Studio)
Terminal Server/Projection (Xbox, Mira)
Devices (Windows CE, MPD)
Feedback Loop (Watson/OCA) for Microsoft, industry
Microsoft Update (Office)
-PRD for tools, education (Product teams)

[bottom left rectangle]

CUSTOMER

Methodical customer connection process by end FY03
Fix 33% of OCA/Watson issues by SP2
Fix all MSRC & major P1 security bugs by SP1, SP 2
Drive customer satisfaction to 60% with XP
Windows XP IPU to .28, MPI to 70
Days to Solution (<7 Days) = 90% (80%)
QFE Days to Hotfix – P1 = 14 days (43)

[top right rectangle]

KEY PRODUCT DELIVERABLES
Windows 2000 SP 3 Q2 2002
Windows XP Refresh Q3 2002
Windows XP SP1, Freestyle, Tablet PC, Mira, Embedded SP 1
MSN 8 Q3 2002
Corona Q4 2002
Windows NET Server Q4 2002
Longhorn PDC Q2 2003
Windows XP SP2 Q2 2003

[top-middle right rectangle]

COMPETITION
Linux: Win in edu/gov’t/emerging, prove lower TCO
Apple: Partner w/ISVs/IHVs on scenarios, win digital media reviews/leadership
Real: Maintain lead, broader/profitable ecosystem

[lower-middle right rectangle]

ORGANIZATION

Single vision/priorities for Windows Client, make WinBLT an effective decision making body
Fill critical positions
OHI + 5% in communication, x-group, & connection
Progress on org span by Oct people review

[bottom right rectangle]

ECOSYSTEM

All XP ingredients: >50% of market leading products DFW
% of Pro Devs, targeting Win XP: 75%
% of DFW drivers redist on WU: 50%
% of DFW partners in OCA program: 60%
WM format on Top 100 sites: 40%
Top 4 NAT vendors support 6to4 (achieves 80% coverage)

MICROSOFT CONFIDENTIAL
6/18/2003
FOR INTERNAL USE ONLY
35

______________________

Guidelines

Purpose: Highlight the non-financial performance metrics/goals your business will be measuring in FY03. Assume that these metrics will be reviewed at the mid-year Scorecard Review next year.

Instructions:
*Here are some ideas of things to include:
– Thought Leadership

*Shared Bets
- What investments are you making in support of key cross-company initiatives?
- What will you deliver in the current fiscal year?

*Key Product Deliverables
- Major product milestones/launches/important feature/product deliverables in FY03
- Product shipment dates
- PSS/QFE response/service level commitments
- Key trustworthy metrics (security, availability, privacy)
- If acquisitions are a part of this process please discuss

*Customer Goals
- Customer/product satisfaction goals
- Support for communities
- Important flagship customer situations
*Organizational Goals
- OHI, People goals and initiatives

35

MS-CC-Bu 000000180672
HIGHLY CONFIDENTIAL


[Graphic: "FY01-FY05 Windows Client P&L" goes here]

36

MS-CC-Bu 000000180673
HIGHLY CONFIDENTIAL


[Graphic: "FY 03 Imperatives" goes here]

[Contents of “FY 03 Imperatives” graphic as text:
************************************]

FY 03 IMPERATIVES

* Drive Revenue & XP Excitement
- Promote XP Software, Establish Products, Push to Professional+, Win Emerging
* Turn the corner on Longhorn
- Builds, alignment, execution
* Earn the Trust of Our Customers, Partners, & Government
- Community, closing the loop, compliance with SRPFJ
* Win against Linux
- Government, education, emerging
* Invest in the Ecosystem
- Metrics, roadmap, leadership
* Develop People & Organization
- Hires, communication, cross group, manager span, training

Challenges & Discussion
* Winning Against Linux: government, education, enterprise, embedded
* SRPFJ: OEMs hiding our innovations; Work to deliver, & comply
* Dry spell coming in FY04 – revenue, annuity, competition
* Emerging markets plan – Linux, other OSs, and piracy: ideas welcome
* Improving sick ecosystem – quality, innovation, profit
* Product segmentation – how many “premiums”?
* Finding the right balance on legacy support
* Making customer trust/connection a part of the culture
* Piracy: How to make progress (and yet balance with Linux)

MICROSOFT CONFIDENTIAL
6/18/2003
FOR INTERNAL USE ONLY 37

[************************************]

37

MS-CC-Bu 000000180674
HIGHLY CONFIDENTIAL

________________________________________________

Credit: wallclimber

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4 Comments

  1. David Gerard said,

    July 15, 2009 at 11:17 am

    Gravatar

    Noting of course that “Trident” in those slides is the HTML renderer in IE.

  2. twitter said,

    July 15, 2009 at 2:16 pm

    Gravatar

    Note also that media is seen as the most important competitive tool against Real and Apple. In the form of patents and FUD, media is also a weapon against free software. This explains the importance of Silverblight contracts with their media dinosaur palls and their mad push of Moonblight, mono and Banshee. It also explains their hostility towards ogg theora.

    Fortunately for everyone but M$, most of these plans and pushes have come to nothing. Customers don’t want digital restrictions and loathe the broken restrictions M$ provides more than the rest.

    Roy Schestowitz Reply:

    Here is an antitrust exhibit that’s a memo on the subject:

    Microsoft planning to use media patents against GNU/Linux

  3. cies said,

    July 15, 2009 at 11:58 pm

    Gravatar

    “win against linux”

    a top priority, but not a single bit about how they’d like to accomplish that. linux (and the freesoftware movement as a whole) is not an entity you can win from. it’s not a business, a person, a country… it’s virtual, it’s more like a ghost.

    i wonder how they’d like to win, the patent gun (another ghost-realm thing) is the only weapon they have left. and that one’s crumbling already.

    im looking forward to the day that they present a spreadsheet+chart showing that maintaining windows is simply to expensive for them. that they therefor will opensource it, or move over to linux.

    office is a product that (i believe) people actually _want_, in contrast to windows that people are basically forced to use. i think there is room for office on various platforms. but the times of m$ monopoly are coming to an end.

    sorry ballmer.

    (i wrote this from novell’s opensuse, running kde (no mono!), i think its quite a brilliant product they produce on a loss)

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    An innocent judge (never proven guilty of anything, only publicly defamed with help from Team Battistelli and dubious 'intelligence' gathering) is one of the forgotten casualties of the latest meeting of the Administrative Council (AC), which has become growingly complicit rather than a mere bystander at a 'crime' scene



  30. Nepotism at the European Patent Office and Suspicious Absence of Tenders for Big Projects

    Carte blanche is a French term which now perfectly describes the symptoms encountered in the European Patent Office, more so once led by a lot of French people (Battistelli and his friends)


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