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Microsoft’s Gambit Strengthens Intel’s Hand

Bill Gates’ splashy announcement last week in Beijing that Microsoft will begin to offer a $3 software package called the “Student Innovation Suite” to emerging market schools put the low-cost PC ball in the manufacturers’ court.

The terms of the deal – governments can only get it by providing free computers to students – suggest Microsoft is trying to compete with One-Laptop-per-Child’s $100 laptop, which runs on a version of Linux. Vital Wave Consulting notes, however, that Mr. Gates wasn’t sharing the stage with PC manufacturers, so Microsoft’s strategy may not be to compete directly with OLPC, but to stunt its growth by removing Windows as a barrier to offering low-cost PCs.

Microsoft’s announcement, together with a production delay for OLPC’s first shipment, presents an opportunity for local manufacturers and global PC companies. Chinese or Indian PC makers are working hard to market ultra low-cost PCs, but they will have trouble scaling outside their own countries. HP, Dell, Toshiba or Acer may eventually capture this market, but the real near-term beneficiary is Intel, whose Classmate PC can run on Windows or Linux. How long will it be before Intel announces the marriage (and resulting cost savings) of their Classmate PC and Microsoft’s Student Innovation Suite?

Also in the news this week
• How will mobile search business models differ from PC Search?
• Motorola stumbles with low-cost handset strategy
• Free mobile directory assistance launched by MS and Google

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