And now, a prepaid computer

By : |May 25, 2006 0



By Gilbert Le Gras

WASHINGTON- The World Bank’s private sector arm and Microsoft Corp. are
borrowing from the prepaid cellular phone marketing success to see if they can
fund sales of personal computers in developing countries, officials said on
Wednesday.

“We were trying to understand why we were not being successful and the
mobile phone guys were being successful and our hypothesis was they’ve come up
with a terrifically flexible way to acquire their product and services with a
prepaid capability,” said Craig Fiebig, general manager of Microsoft’s
emerging markets group.

Microsoft, the world’s largest software maker, estimates there are 1.37
billion households worldwide that do not have desktop computers so the potential
client base for prepaid computers could reach range between 300 to 400 million
homes.

The company chose to test prepaid computers in Brazil, a large middle-income
country with annual interest rates of up to 40 per cent, to gauge the appeal of
selling a big ticket item under a flexible financing scheme, he added.

“If you can make it work there, then you can make it work
elsewhere,” Fiebig said.

One thousand PCs were put up for sale in Brazil this week for $600, of which
consumers pay $200 to $250 while the local branch of HSBC Holdings Plc covers
the balance.

Rather than pay monthly installments, users buy cards that activate their
computers until the balance, plus interest, is paid off. Meanwhile, the
International Finance Corp. covers the commercial bank’s risk from users’
variable payments.

“What you’re buying here is time. Time really is money here,” said
Xavier Jordan, financial specialist at the World Bank’s IFC.

“You can have good or bad credit. It’s for businesses and people who
don’t have $600 to buy a PC and for those who can’t get financing because they
don’t have stable or steady income or have difficulty making regularly scheduled
payments.”

The next phase of the pilot project goes larger scale in September when
30,000 to 50,000 PCs equipped with technology that disables the computer after a
time lapse are due to be sold in Brazil, he added.

Personal computer sales average about 5 million units a year in Brazil and
preliminary marketing of prepaid PCs shows 31 per cent of those buyers are users
who would not have otherwise bought the equipment.

The IFC takes on the risk from variable cash flow and would be compensated
accordingly in months of excess returns.

While the World Bank lender fine tunes the financial risk mechanism,
Microsoft is already introducing the pay-as-you-go PCs in other emerging markets
like China, India, Mexico and Russia.

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