Microsoft announced today that starting in 2009 all Hewlett-Packard consumer Windows PCs distributed in the USA and Canada will be preloaded with Live Search as the default Web search engine in Internet Explorer and with a custom Live Search enabled toolbar featuring their Silverlight technology. HP had previously been signed up with Yahoo.
Danny Sullivan has a nice table of PC OEMs, their US market share, and the search engine they have signed up with and adding HP clearly is a leg up for Microsoft since HP is a strong number 2 (24%) to Dell (31%) who signed with Google in 2006. Before this HP deal, Microsoft only had Lenovo whose US share was minimal.
The question, of course, is how many users actually stick with the OEM presets for IE or change them or switch to Firefox (which defaults to Google). All of the search engines track the sourcing from toolbars and preloads (use one of them for a search query and check the parameters on the URL) so they have a good idea on traffic and ROI at least after one of these deals is started, but Microsoft undoubtedly has more than ROI on their mind.
First Microsoft has to grow beyond their single digit Web search share if their advertising aspirations are to be realized and this is one way of doing that. Second, a Silverlight toolbar means a Silverlight preload which Microsoft had yet to ante up for with the OEMs and that’s critical if they expect to get their Adobe Flash killer off the ground. There’s been no insight into what sort of bidding went on for the HP eyeballs, but there are lots of reasons why Microsoft would not want to be outbid.
Microsoft did its bit for the Chinese government publicity tour to the USA by once again publicizing its OEM deal with Lenovo even though the details for the upcoming year haven’t really been worked out yet. The nominal figure is reputed to be “as much as” $1.3B which would be up slightly from last year’s $1.2B and, of course, it includes other markets besides China. The upside for Microsoft, besides helping out a pal, is that the mutual backscratching with the Chinese government keeps them focused on piracy reduction.
A How-To kit for the ideal PC has been making the rounds of leading design shops. It calls for “accelerated curves” and “purposeful contrast.” The preferred colors include a shade of black called Obsidian and a translucent white dubbed Ice. “We want people to fall in love with their PCs, not to simply use them to be productive and successful,” reads the enclosed booklet. “We want PCs to be objects of pure desire.”
Doesn’t sound much like Microsoft (MSFT), does it? But it is. BusinessWeek has learned that a team of 20 in-house designers has been working quietly for the past 18 months on an elegant new look for PCs that will run Microsoft’s next operating system, Windows Vista. It’s a major departure for the company, which historically has left design to the likes of Dell (DELL), Hewlett-Packard (HPQ), and Gateway (GTW). Persuading the hardware guys to embrace the toolkit won’t be easy. They’re already working overtime to build better-looking gear on their own.
Microsoft for years has pushed their functional specifications on OEMs via the Windows Hardware Engineering Conferences and other mechanisms, but style?
Microsoft is no newcomer to hardware design, of course. The company has made PC mice and keyboards for years. The Xbox game console has been a hit. Microsoft is working on a music player, Zune, that it hopes will rival the iPod.
Microsoft’s mice and keyboards are nicely done, but they’re a niche and the Xbox 360 was created with significant outside design help. I expect that the same is true for the Zune, so it’s not quite clear exactly what Microsoft brings to the table. More to the point, the PC business has some tough cost strictures:
But trying to transform the PC ecosystem—even peripherals makers such as Logitech received the kit—takes things to a whole new level. It reflects the fact that the economics of the computer business is changing. The PC world used to be divided into two camps: those who made lucrative software and the poor schlubs who built the low-margin hardware it ran on.
Apple has turned that model on its head. From the beginning it has managed to create a unified design for its products by building everything itself, first with the Mac and then later with the iPod. Although Apple sells one computer for every 20 PCs, the iPod’s success has proved how crucial it is to create a seamless experience for consumers, who are buying much of the gear these days. Says a top PC design executive: “You’re going to see more and more of this desire to integrate hardware and software.”
I’ll buy that, but it’s not clear to me how a color scheme will make the experience seamless – I would have thought the seamless part would start a little closer to Redmond. Besides, if you really want something snappier than a beige box, you don’t have to look too far (e.g.  if you like bright lights). It sounds more like Microsoft is worried that the OEMs aren’t following their functional “suggestions” in lockstep and the styling suggestions are just a bonus.
Hit the link for much more, but the big PC makers aren’t exactly jumping for joy at the chance to further commoditize their products. When all Windows PCs are the same except for the manufacturer’s logo, their margin inevitably goes to zero. I do wonder though if Microsoft has any thoughts of ditching their pesky partners on PCs, just like they did on personal media players with the Zune? It would make the Apple emulation complete.
Microsoft’s gentle anti-piracy diplomacy may well be paying off in Communist China as Doug Young reports at Reuters:
The number of PCs sold in China containing legal copies of Microsoft’s Windows operating system doubled in the first quarter from the fourth, as major vendors joined a campaign to stamp out piracy, new data showed.
Some 48 percent of PCs shipped in China in the three months through March came with legal copies of Windows already installed, compared with 25 percent in the fourth quarter of 2005, according to figures supplied to Reuters on Thursday by data tracking firm International Data Corp. (IDC).
The big jump came as the country’s major homegrown vendors, including Lenovo Group Ltd., Founder Group, Tsinghua Tongfang, and TCL Corp., signed a recent series of landmark deals agreeing to load legal copies of Windows onto most or all of their PCs sold in China.
We mentioned these agreements previously (, , ) and except for Lenovo, they didn’t start until April of this year, so perhaps even better news is yet to come. Economic statistics in Communist China have a history of mutability in response to government policy considerations, but the OEMs listed have already paid for a large number of licenses so why wouldn’t they be putting them on machines?