Moderation note: Everybody can write to Mistica in spanish, in
english, in french or in portuguese, as each person feels more
comfortable with :-) Regarding the posting see the thread "MIT: 100
US$ laptop for children?" at:
http://funredes.org/mistica/castellano/emec/produccion/memoria12

I wrote this article back in october, but only this week I realized I
could send articles in English to MISTICA :-)

This is fun...

Steve Ballmer says we need a US$100 PC to end piracy in poorer countries...

One can't help but to think and reply:
How about a US$50 Windows plus Office Pro Package?
That way we could have a US$150 productivity tool that empowers
people and triggers development.

This is a perfect example of the challenges we face today with
corporate interests and monopolies and oligopolies leading the path
of technological development.

Microsoft makes a ton of money (great for them and in no way
something to criticize) with a huge profit margin (think about US$500
for a carton box, a useless 150 pages book and a couple of CD's), and
has the nerve to demand from the hardware maket (profit margin less
than 10% in retail in underdeveloped countries thanks to competition)
to reduce its profits even more?

We don't need a US$100PC or some mastermind who cares about nothing
but his company (for all the talk he did about poorer countries, he
did not refer to development or empowering the people there).

We need more competition to lower computer and software costs, which
could perhaps achieved by connecting, strenghtening and enhancing the
"poorer countries" markets and paying attention to their needs and
commercial potential (our Bottom of the Pyramid holy grail).

It's very likely a US$100PC would sell well in India, Latin America
or Africa. But so would sell a US$50 version of Windows + Office Pro.
On the other hand if we could actually sell this US$100 device to 2%
of the 1 billion people we could reach (combining India, Africa and
Latin America's "reachable" markets population), we'd be talking
about 2 billion US$ in sales (US$2,000,000,000.00). Should we have a
5% profit margin for such a large operation, we'd only be talking
about US$100 million in profits. Divide that into several companies
if there is competition in the market and we are talking about
unattractive pocket change for the large PC manufacturers. Steve
wouldn't dare speaking of selling 20 million copies of Windows and
Office for US$50, why should PC manufacturers do the same?

With the current state of things, PC manufacturers make around a 5%
profit margin and are making a lot more money than that by selling
market standard computers priced at hundreds or thousands dollars.
Take for example Dell: In 2003 they made US$35 billion in sales for
US$2 billion in profits (almost 6%). If you're making US$2 billion in
profits, with little investment in research (one of the common
criticism for Dell), would you spend tons of money in research to
come up with a product that will increase your profits
in less than 5% and could actually hurt your money making divisions?

And with the current state of technology we can barely get a decent
Palm Zire hand held for less than a US$100 (which compared to my
US$550 Treo actually looks "indecent" or a pathetic attempt at being
useful). You can get US$200 - US$400 Palm devices that actually can
improve productivity once you add a full size keyboard (US$50 value),
Microsoft Office files editing software (US$40 value - included in
many models), blue-tooth/wi-fi technology (US$100 - included in many models).

When looking at the facts, our Bottom of the Pyramid markets look
more and more like a frozen mammoth in siberian ice or a giant squid
in the depths of the ocean. We know they are out there somewhere,
they must be. Someone somewhere has seen one, has found one, but no
one knows how to tap one.

Help me out here, fellows, before I drop all my work and go back home
to sell Dell computers to rich people and companies, make a 5% profit
and once a year make a feeling-good donation to my favorite local-charity. :-)

________________________________

Source for DELL Earnings:

Forbes
Sales: US$35.4billion // Profits: 2.1billion
http://www.forbes.com/finance/lists/38/2003/LIR.jhtml?passListId=38&passYear=2003&passListType=Company&uniqueId=IGBI&datatype=Company

CNN/Money
Revenue: US$41.4billion // Total Net Income: US$2.6 billion (this
numbers are a little different than those quoted at Forbes, but lead
us to the same conclusion).
http://money.cnn.com/news/companies/research/research.html?pg=sn&symb=DELL

________________________________

Original article:
http://news.zdnet.com/2100-3513_22-5419179.html

Feedback and opinions:
http://news.zdnet.com/2100-3513_22-5419179.html#talkback
Nearby Mon Aug 29 12:03:21 2005