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November 22, 2005

Software broker pushes Microsoft license remarketing

A UK company set up to open up a market in pre-owned, disused, or unwanted Microsoft software licenses, says it has starting trading after getting the stamp of approval from Microsoft UK, which has substantiated the legalities of its new business model.

By CBR Staff Writer

Over the last 14 months, Disclic Ltd has been working mostly with various insolvency practitioners in the country, such as Ernst & Young, PKF, Grant Thornton, and Tenon, identifying cases where unused perpetual Microsoft software licenses could be legally transferable to another entity. We have done the necessary due diligence, and Microsoft has told us that ours is a legal business model, said Noel Unwin, an executive with Disclic Ltd.

The company says Microsoft’s own transfer terms and conditions contain a clause that permits disused or unwanted software license agreements to be transferred back into private sector businesses from insolvent, or solvent but downsizing, companies. Unwin said the company has accumulated 40,000 licenses. On average there might be 15,000 insolvencies a year in the UK, so there may well be hundreds of thousands of licenses out there, he said.

The license and the software media need to be treated as separate assets, Disclinc advises, and while there are underlying restrictions within Microsoft’s transfer conditions, the ability to transfer a license from one company to another is completely legal as long as the letters of the law are adhered to.

The company, which is a registered Microsoft partner, believes that in recognizing a potential residual value in unused software licenses it can start to trade previously overlooked intangible assets that could be remarketed to small and medium-sized organizations at discount prices.

On its web site, the broker notes that 2003 versions of Windows/Exchange Servers or Office are likely to sell at prices that are a minimum of 20% off normal Microsoft reseller prices. Microsoft Office XP is discounted between 20% and 30% below, and Windows Server 2000 at levels which would make for savings of between 30% and 40%. The sale of a perpetual license is completed using Microsoft’s own transfer forms.

Perpetual licenses provide the owner with the right to use the software product forever and for as many desktops for which the company has purchased licenses for use of the relevant software.

Not all perpetual licenses qualify for transfer, however. There are some underlying restrictions on some licenses, said Unwin. We can’t transfer operating system licenses. Licenses bought under Microsoft’s Select or Enterprise Licensing schemes are not transferable, either. Most other application and server-based licenses do qualify, though.

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