Why the Wal-Mart "snub" should be a big deal for gOS

My blogging colleague Dana Blankenhorn reports that ThinkgOS founder David Lui isn't worried by the Wal-Mart snub.  He should be.

"It sounds like a big story but it’s not that big a story. Right off the bat we were telling people what we were doing was creating a concept. We knew we were targeting a tech-savvy crowd. The customers Wal-Mart has in the stores are our ultimate vision. We learned a lot, but we felt it was only a soft launch."

There are a few contradictions in that statement alone.  First, I accept that gOS is a concept that's aimed at tech-savvy users, but in that case I can't understand why the company targeted Wal-Mart customers.  There are far better ways to go about getting the attention of tech-savvy users. 

Also, going for a Wal-Mart soft launch just doesn't make sense.  As a rule Wal-Mart doesn't do soft launches because devoting shelf space to stuff that's hard to shift means losing money, and Wal-Mart didn't get where it is today by devoting space to soft launches.

However, I do feel that Lui has hit the nail on the head with this statement:

"Making money from a $199 PC is very difficult. The margins are very small. The margin on a $399 PC is three times that – you have to sell three times as many units. It doesn’t add up."

Well there's your problem!  As much as I love getting cheap hardware, you have to be careful how far you drop the price.  Dell over the years has dropped the price of PCs so much that the company devalued the budget PC market so much that it became hard for any company to make money selling cheap PCs.  This in turn put pressure on vendors to rake a profit off the other end of the market - the high end gamer and enthusiast market (oh, and businesses ...).  Cheap hardware doesn't leave much of a budget for things like marketing.  Some products don't need marketing, but others do, and it seems that a $200 PC needs a certain level of marketing and consumer education than the profit margins can't accommodate.

So, why should the Wal-Mart's statement that Linux PCs "wasn't what our customers were looking for" bother gOS?  Well, here's what that means to me - you can take a PC (a pretty decent PC, ideal for your average home user not into gaming or media center stuff), load a Linux distro on it, sell it at a price that's practically giving it away and then put that PC on sale in a store where customers are traditionally thought of as looking for bargains, and that PC turns out to be not what the customers want.  This experiment gone bad won't be remembered as "Linux-based Everex PCs didn't sell in Wal-Mart stores" or "it was a soft launch and that's why Wal-Mart pulled the plug on it."  No, it'll be remembered as a Linux failure, and that's a shame. 

There seems to be a rush to get cheap Linux PCs to market and I can't shake the feeling that this isn't good for Linux. 

Thoughts?