Microsoft Unveils Pay-As-You-Go Personal Computing Designed for Emerging Market Consumers

REDMOND, Wash. — May 21, 2006 — Microsoft Corp. today announced the industry’s first pay-as-you-go personal computing offerings powered by Microsoft® FlexGo™ technology, enabling more-flexible Microsoft Windows®-based PC purchasing options for customers in emerging markets. Customers can get a full featured Windows-enabled PC with low entry costs that they can access using prepaid cards or through a monthly subscription.

The pay-as-you-go business model makes PCs more accessible by dramatically reducing the entry cost and enabling customers to pay for their computer as they use it, through the purchase of prepaid cards. Market trials are starting first in emerging markets where inadequate access to consumer credit, unpredictable income and high entry costs prevent many consumers from purchasing a computer. The FlexGo technology supports Microsoft’s global commitment to help people realize their potential through the benefits of personal computers.

“Today there are already more than 1 billion prepaid mobile phones used around the world, so we know FlexGo enables a familiar and comfortable pay-as-you-go model that works for people with variable or unpredictable income,” said Will Poole, senior vice president of the Market Expansion Group at Microsoft. “Offering unprecedented flexibility of PC ownership will bring high-quality personal computers within the reach of hundreds of millions of families and small businesses in emerging markets so they too can enjoy the many benefits PCs bring in education, entertainment, communication and productivity.”

Microsoft’s innovative business approach brings together leading partners spanning the hardware, telecommunications, retail and financial services industries to make pay-as-you-go personal computing a reality for the first time, and expand subscription computing to a wider audience. The company recently completed a successful year-long market trial of pay-as-you-go offerings in Brazil with leading national retailer Magazine Luiza. Partners including Advanced Micro Devices Inc. (AMD), HSBC Bank Brasil S.A., Infineon Technologies AG, Intel Corporation, Lenovo, Phoenix Technologies Ltd., Transmeta Corp. and more, will join Microsoft for the next round of pay-as-you-go and subscription trials in Brazil, China, Hungary, India, Mexico, Russia, Slovenia and Vietnam. Together with the International Finance Corp. (the private-sector investment arm of the World Bank Group), Microsoft is exploring ways to enable its financial partners to underwrite PC purchases and prepaid cards on the most affordable terms for lower-income consumers. Microsoft’s FlexGo technology will create new and profitable opportunities for Microsoft’s global hardware partners as well as for local original equipment manufacturers (OEMs), banks, telecommunications providers and retailers in emerging markets.

“Microsoft FlexGo will be revolutionary for us in the way we sell and finance PCs by making this new flexible pay-as-you-go model possible. Our lower-income customers are excited to finally buy their first PC with minimal upfront investment, paying for time as they need it, and owning a computer with superior features and genuine software,” said Frederico Trajano, sales and marketing director for Magazine Luiza. “Magazine Luiza is very pleased to be working with Microsoft to bring this to the people of Brazil.”

To make pay-as-you-go computing possible, Microsoft pioneered FlexGo technology, aligning hardware, software and service solutions to work in unison to meter and add time to the PC, so retailers, telecommunications providers, banks and OEMs can offer PCs to a broader community of customers. FlexGo technology enables consumers or small businesses to have a PC at a price they can afford, and pay for time only as they use it, an experience bringing the flexibility of an Internet cafe into the home. The technology informs users of time used, showing them how to add more hours by simply typing in a number from a prepaid card. If time is not added, the PC gradually moves into a “reserve tank” or limited-access state until customers purchase more time either online or at local vendors. The PC is owned outright after a set number of hours are purchased. Using FlexGo enables providers to reduce the entry costs of PC ownership by 50 percent or more, and to provide a flexible approach to paying for the remaining costs of the PC, company officials said. 

“Microsoft’s trials in Brazil are a small and a significant step in democratizing technology. The experiment demonstrates that by making computing affordable, through innovative business models, we can convert the ‘digital divide’ into a ‘digital dividend,’” said C.K. Prahalad, distinguished university professor at the University of Michigan and author of “The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits.” “It is my hope that Microsoft will rapidly diffuse this understanding and approach from Brazil to markets like India, Mexico, China and South Africa. There is an opportunity at the bottom of the pyramid and global firms can ‘do well and do good’ by activating this new category of consumers.”

In addition to launching a second market trial in Brazil this week, Microsoft will expand pay-as-you-go computing with FlexGo technology to India, Mexico, Russia and China over the next several months.

Expanding the Possibilities for Subscription Computing

Along with the new pay-as-you-go model, Microsoft has also been working with major telecommunication companies around the globe on subscription computing offerings that provide convenient and predictable monthly payments for a full-featured PC with broadband access and genuine software. With the availability of Microsoft FlexGo technology, it will be possible to expand the potential of the subscription model by enabling telecommunications providers to better secure the PC asset from default and offer this option to a broader range of customers. Telecommunications partners around the world have worked with Microsoft for more than a year conducting successful commercial offerings under this business model. Over the next few months, Microsoft will roll out subscription PCs with FlexGo technology with Videsh Sanchar Nigam Ltd. (VSNL) (India), T-Com (Hungary), Vietnam Datacommunication Co. (VDC) (Vietnam), SiOL doo (Slovenia) and Telefonica Brazil (Brazil).

More information about pay-as-you-go and subscription computing enabled by FlexGo technology can be found at http://www.microsoft.com/whdc/payasyougo.

Founded in 1975, Microsoft (Nasdaq “MSFT”) is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.

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Supporting Industry Quotes

“From the onset of our 50×15 efforts in 2004, AMD has called for sustainable, flexible business models to bring the knowledge and power of the Internet to customers in high-growth markets.   Microsoft’s new FlexGo technology enables creative, pay-as-you-go options for customers, allowing a much broader range of people around the world to afford personal computing and Web access.”  

  • Billy Edwards
    Chief Innovation Officer and Senior Vice President, AMD
    AMD

“Access to computing will help connect the people in India to the modern world of technology and business. Supporting Microsoft’s pay-as-you-go computing model reflects Drishtee’s goals to provide access to technology for people in Indian villages. This model will allow our villages to create and sustain new business and education opportunities.”

  • Satyan Mishra
    Managing Director
    Drishtee

“We are committed to working with Microsoft on its pay-as-you-go computing initiative enabled by FlexGo. This program represents Grupo Elektra’s commitment to help provide people in Mexico with access to technology who wouldn’t traditionally be able to afford a PC.”

  • Miguel Boils
    Marketing Director, Computing and Technology
    Grupo Elektra SA de CV

“HSBC Brasil is excited to be a Microsoft partner to develop the pay-as-you-go computing model — a model we believe has potential to transform the way people buy, sell and use computers. Even more important is that this new model would increase the adoption of technology among emerging markets’ populations since it provides an innovative source of financing through the pay-per-use concept.”

  • Regis Eduardo Carreira
    Relationship Manager, Corporate Banking
    HSBC Bank Brasil SA

“We are pleased to be working with Microsoft to support pay-as-you-go computing trials by encouraging local financial institutions to make credit more accessible to lower-income segments of the country’s population. By making access to personal computers and computing resources more affordable for lower-income individuals, Microsoft’s innovative pay-as-you-go computing model can help bridge the digital divide in emerging markets.”

  • Lars Thunell
    Executive Vice President
    IFC

“We are very excited to be working with Microsoft to support its pay-as-you-go computing initiative enabled by FlexGo. This is a truly new model for the computing industry, bringing innovation at all levels. It is an honor to be selected to provide the secure access system that makes it possible to deliver the platform to markets around the world.”

  • Sandro Cerato
    Vice President and General Manager
    ASIC Design & Security, AIM Group
    Infineon Technologies

“Through our World Ahead program, Intel has committed $1 billion to enhancing lives in the world’s developing communities by driving progress in PC accessibility, Internet connectivity and education. We are excited to work with Microsoft to implement the FlexGo technology and further equip millions of new users with the power of low-cost, full-featured PCs through a tailored financing model that fits their lives and budgets. Pay-as-you-go and subscription computing with Microsoft FlexGo technology will be a key part of Intel’s portfolio of enabling efforts in developing communities in 2006 and beyond.”

  • William M. Siu
    Vice President and General Manager
    Channel Platforms Group
    Intel

“By partnering with Microsoft for this pay-as-you-go computing program, Lenovo is helping to bring innovation to the masses. This program not only provides computers, it provides resources and opportunities to customers in emerging markets around the world.”

  • Philippe Davy
    Vice President of Strategic Alliances
    Lenovo

“Joining with Microsoft on this subscription computing initiative demonstrates our belief that subscription computing will enable us to offer broadband and PC technology in an affordable and convenient way to a whole new group of users in Hungary. We will be commencing field testing of the technology in the second half of 2006.”

  • Chris Mattheisen
    COO
    T-Com Hungary

“Technology will be one of the biggest factors as developing countries strive to make their mark in the global economy. Access to personal computers will help educate our children, keep our small businesses running and strengthen our local economies. Microsoft’s commitment to making technology available, accessible and easier to use in the emerging markets will create opportunities today and in the future.”

  • Dr. Ashok Jhunjhunwala
    Indian Institute of Technology, Madras

“We are very excited by Microsoft’s subscription technology, which opens up creative new business models and opportunities for us, and innovative offerings for our customers. We believe this technology will help us create offerings of value to our customers, and enable us to attract new subscribers and drive new revenue streams with relevant and differentiated solutions and services.”

  • Tomaz Berginc
    CEO
    SIOL

“The pay-as-you-go technology could be an essential factor to increase the computer’s penetration in emerging markets, and Telefonica is very happy to participate in this innovation with Microsoft.”

  • Benedito Fayan
    Latin America Innovation Director
    Telefonica Brazil

“We are gratified to see nearly two years of close engineering collaboration with Microsoft come to fruition in the commercial launch of FlexGo. The specialized version of our Efficeon processor and the hardened platform that we designed for Microsoft FlexGo technology provide robust security against repurposing, making it an ideal product for subsidized systems for subscription and pay-as-you-go computing.”

  • Arthur L. Swift
    President and CEO
    Transmeta

“VDC strongly believes that the subscription model and Microsoft FlexGo technology together will help us serve a much larger number of customers. We are very pleased to have launched a subscription offer called ‘OneClick’ in the marketplace in April 2006 and look forward to providing PC technology access and broadband to many more customers in the years ahead.”

  • Vu Hoang Lien
    CEO
    VDC

“We are excited to work with Microsoft on its subscription computing initiative enabled by FlexGo technology. This program will enable us to offer broadband and PC technology in an affordable and convenient way to customers through subscription computing. We are looking forward to participating in upcoming customer trials in the second half of 2006.”

  • Shashi Kalathil
    President, Broadband & Retail Business Unit
    VSNL