Microsoft's answer to the $100 laptop: Pay-as-you-go

Redmond (WA) - Emerging markets are considered the next big opportunity for IT companies: One idea to connect more people to the Internet is the $100 laptop. Microsoft never warmed up to that concept, claiming that such a device will not be powerful enough to enable access to key applications. Instead, the firm creates a pay-as-you-go computer model to bring more computers to emerging markets.

Microsoft's idea - referred to as "FlexGo" technology - circles around the prepaid phone card, which has been established around the globe, especially in regions and population groups with changing income. Just like the phone, Microsoft's pay-as-you-go PC would be subsidized by the usage of "minutes," purchased for example at convenience stores. The company claims that such an approach could reduce the entry cost of a PC by "50% or more." Other than with the pre paid mobile phone model, consumers would actually own their PC after a certain number of minutes has been purchased.

"Today there are already more than one 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 did not provide details about how much such a Windows-based PC will cost, the type and price of services that will be offered or how many minutes consumers will have to purchase to own their PC. However, it is clear that the strategy will only lower the price to bring a computer system home. The overall system cost will actually be higher, according to the frequently asked questions posted on Microsoft's website. In other words, what Microsoft is introducing is simply a cross-financing model for PC to accelerate the adoption of the PC - and its Windows operating system.

In contrast, the One Laptop Per Child nonprofit association intends to offer a $100 laptop that is owned by buyer's right after the purchase. As of now, it appears that such a portable computer would use a 500 MHz AMD processor. There will not be a hard drive, but a 512 MB flash memory unit as well as a screen that runs at a 1110 x 830 pixel resolution in black and white and in 640 x 480 pixel resolution in color mode.

Microsoft said that it recently completed a successful year-long market trial of pay-as-you-go offerings in Brazil, in which 31% of participants stated they would not have been able to purchase a PC otherwise. The next round of trials is headed to China, Hungary, India, Mexico, Russia, Slovenia and Vietnam.

Partners of the initiative include HSBC Bank Brazil, Infineon, Intel, Lenovo, Phoenix, Transmeta and interestingly also AMD, which also provides key technologies in the $100 laptop.