Microsoft Testing Pay-as-You-Go PC System in Brazil

Cut-rate PC/hardware Windows XP Starter Edition bundles aren't Microsoft's only solution for bringing computing to the masses.

Microsoft (MSFT) unveiled a new financing program designed to make PCs more affordable to emerging-market customers on May 22, the day before the kick-off of its annual Windows Hardware Engineering Conference (WinHEC) in Seattle.

The new pay-as-you-go program and associated metering technology that enables it are known collectively as "FlexGo."

In partnership with a handful of hardware, telecommunications, retail and financial services partners, Microsoft is launching this week full-fledged FlexGo trials in Brazil, and will add trials in India, China, Russia and Mexico within the month, Microsoft officials said.

Microsoft and its partners — which include partners Advanced Micro Devices (AMD), HSBC Bank Brasil, Infineon Technologies (IFX), Intel (INTC), Lenovo, Phoenix Technologies (PTEC) and Transmeta (TMTA), as well as local service providers in several countries — are testing FlexGo in two different ways.

Via one set of trials, after making an initial down payment on a mid-range PC, users will be able to buy time and make payments on their PC using prepaid cards, similar to those sold by cell-phone makers in various countries.

Users will pay for the time they use their PCs, much the way individuals do now in Internet cafes. An alert on users' desktops will show them how much computing time they have available before they need to add more credit.

In the other set of subscription trials, users will make initial down payments on midrange PCs and make monthly payments of software and broadband services from their local service providers, akin to the way many users pay cable providers for TV and software access today.

The FlexGo program is meant to complement Microsoft's existing Starter Edition program, said Mike Wickstrand, the director of the FlexGo program, who is part of Microsoft's Windows market expansion division.

Microsoft currently offers locally-customized, stripped down versions of Windows, known as Windows Starter Edition, in 88 countries.

"Starter is usually a first PC or for a family that is a first-time PC user," Wickstrand said. "But FlexGo is more about first-time buyers."

According to Microsoft's research, Wickstrand said, these two communities are not one in the same.

Emerging market users — those in middle-and low-income countries as defined by the World Bank — are keen to own midrange PCs, with 512 MB of RAM and 80 GB drives, that they can use at work, home and school, he said.

Microsoft doesn't see FlexGo competing with the $100 PC One Laptop Per Child initiative, championed by the Massachusetts Institute of Technology's Nicholas Negroponte.

"We applaud Negroponte's vision and goal of seeing children get access to technology," Wickstrand said. "But we've found families aspire to own a Windows PC that they can use at Internet cafes, home, school and work."

With FlexGo, Microsoft isn't targeting users with no means.

"It's more complicated than these people just don't have enough money," Wickstrand said. 'It's also about the irregularity and unpredictability of the money they do receive."

For the past year, Microsoft has been honing its theories about what users in developing countries want by running an initial, smaller pay-as-you-go trial in Brazil with national retailer Magazine Luiza.

Microsoft will conduct additional, wider-scale trials in Brazil starting this week, and will extend these trials to the aforementioned other developing countries, as well as Slovenia and Vietnam, over the next six months.

Microsoft may even make the FlexGo program available to middle- and lower-income users in the U.S. over time, Wickstrand said, depending on interest and other factors. Wickstrand has no timetable for when and if Microsoft might extend the program domestically, however.

Microsoft's strategies for continuing to grow its Windows business are expected to be a key theme at WinHEC this week. Microsoft officials said earlier this year that the company is looking to new, untapped markets as one of the main ways to continue to build PC software/hardware sales, given that Microsoft currently owns in excess of 95 percent of the PC operating system market.

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