Microsoft’s One Laptop Per Child Project: Unintended Consequences

| About: Microsoft Corporation (MSFT)

Microsoft's (NASDAQ:MSFT) move to make Windows available for $3 to emerging markets is already having an impact on Linux.

According to an AP report, Nicholas Negroponte said the $100 laptop for kids in developing countries actually runs about $175. He also added that it will be able to run Windows and could be used in the U.S. too.

A few big points to ponder in this one:

1. Microsoft's $3 software package looks more brilliant by the minute in terms of heading off Linux encroachment. The One Laptop Per Child project represented Linux's big chance. Teach the fastest growing areas to grow up with Linux and Microsoft would be hurting in a generation or two. By offering a $3 package of software, Microsoft makes itself competitive with desktop Linux. As Dana Blankenhorn notes: Microsoft gets a strategic win on the desktop. It's too early to count out open source though. 

2. Is the price tag ($175) too much? The OLPC (blog focus) needs 3 million orders to get production rolling and it's unclear what countries will pony up the cash. Most of the countries that have expressed interest–Uruguay, Argentina, Brazil, Pakistan, Thailand, Nigeria and Libya–should be able to pony up the extra $75. Nigeria and Libya have oil production windfalls coming to them. The economies in Argentina and Brazil are stable.  Thailand should be equipped to foot the bill. Pakistan is shaky, but has received more foreign aid since 2001. Perhaps the IMF or Gates Foundation could make up the difference for other countries.

3. The OLPC would wreak havoc in the U.S. According to the AP report, 19 governors have expressed interest in the OLPC. That should spark fear at Apple (NASDAQ:AAPL) and other PC players in the education market. On its recent conference call, Apple noted that it expected margins to fall due to average selling prices in the education market. A $175 laptop could crush others–notably Apple and Dell (NASDAQ:DELL)–that play in the education market.