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Microsoft cuts prices for Malaysia

Breaking its one-price policy, the company is selling a scaled-down software package as part of a Malaysian government drive to increase computer ownership.

Mirroring a similar deal in Thailand, Microsoft has announced a scaled-down software package as part of a Malaysian government drive to increase computer ownership.

The Redmond, Wash.-based software giant has unveiled a customized, Malay-language version of its Windows XP Home Edition that will be bundled with all new computers under the Malaysian government's new PC Gemilang project.

Launched this week, this initiative aims to raise PC penetration rates in Malaysia from about 15 percent currently to 35 percent over the next two years. To achieve the goal, the Malaysian government has asked Pikom, a local IT association, to develop a low-cost desktop for the masses, said Butt Wai Choon, managing director of Microsoft Malaysia.

Pikom's budget PC features an 1.7 GHz Intel Celeron processor, 128MB of RAM, a 40GB hard drive, a 15-inch CRT monitor and peripherals such as a mouse, keyboard and speakers.

Prices for the desktop depend on the choice of operating system and accompanying software. The Windows version, coupled with Microsoft Work Suite 2004--a scaled-down set of productivity tools for tasks such as word processing and spreadsheets--will retail for $643 (1,147 Malaysia ringgits), while those running a Linux OS and Open Office will cost $586.

"In this program, we are able to bring the price to a point to fit the local market because it is a localized version," Butt said. "For the international English version, it's a set global pricing and it's very difficult to have one country with a different pricing from another."

He did not reveal the exact cost of the Malaysia-only software package. However, an English version of Windows XP Home Edition and Office XP retails for about $199 and $399, respectively. This means the base price of the modified Windows OS and Work Suite bundle would have to be significantly lower than its English-language counterparts to meet Pikom's $643 price tag for the PC.

Citing predictions by Pikom, Butt said up to 100,000 such PCs are expected to be sold across the country.

One price?
Microsoft's latest announcement confirms market speculation that the company may launch stripped-down, low-cost versions of its software for other governments following its initial compromise in Thailand last year.

In June, the software maker joined the Thai government's budget PC program by offering a local version of Windows XP and Office for about $40. The project had previously focused solely on Linux and open-source software.

This move prompted market researcher Gartner to make the bold prediction that Microsoft could change its one-price policy and be forced to halve prices in poorer countries by the middle of this year. Microsoft disputed Gartner's findings at the time, saying that its universal pricing would remain but that the company might make adjustments when it comes to special educational or government-led initiatives.

Besides the open-source threat, Gartner asserts that piracy is the other key impetus for Microsoft's latest concession in Malaysia. The country, along with Thailand and other Asian markets such Indonesia and the Philippines, has been under constant scrutiny by intellectual property rights groups around the world for being breeding grounds for pirated material.

"This is clearly an attempt to get people to buy legitimate copies of Windows. They have tested this strategy out in Thailand and are comfortable with the way it works," said Martin Gilliland, principal analyst for Gartner Asia-Pacific.

"This is profit (Microsoft) otherwise wouldn't have normally made," he said, referring to the ready availability of bootleg substitutes for Windows and other Microsoft products in Malaysia.

Winston Chai of CNETAsia reported from Singapore.