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By | Gavin Clarke 16th June 2009 00:37

Microsoft's Windows 7 price gamble opens door to Linux

OEMs assume barrel-folding posture

Ubuntu creator Mark Shuttleworth is itching for a clean fight with Microsoft on netbooks.

Shuttleworth once told The Reg he can't wait for Windows 7 on this sub-laptop class of machines because it'll finally give Ubuntu the opportunity to compete fairly against Microsoft's operating system in this emerging market.

OEMs have been able to buy and install Windows XP from Microsoft with something close to impunity. The repeatedly prolonged life of Windows XP makes it available for netbooks that would have choked on Windows Vista.

For a moment, it seemed the fight was on - at least from the technology perspective. By all accounts, Windows 7 has cut the fat that slowed Windows Vista on a category of machine that most people (apart from Microsoft) have little trouble recognizing or accepting.

Windows 7 is so good even Shuttleworth is impressed, and he has refused to diss the competition.

Microsoft then went a step further, lifting the restrictions that had stopped more than three applications running simultaneously on a device running Windows 7 Starter Edition - the version of Windows earmarked for netbooks.

But Microsoft now seems to have gifted Ubuntu and others an unexpected prize.

The price of Windows 7 Starter Edition per machine will be around double that of Windows XP Starter Edition. As reported (here - warning: PDF - and here), Windows 7 Starter Edition will be between $45 and $55 compared to $25 and $30 for Windows XP Starter Edition.

It's not clear where DigiTimes, the source of this particular news, got the new price.

The situation is complicated by the fact that the Starter Edition price is generally not disclosed. This version of Windows is an OEM-only edition and pricing comes down to how far OEMs can arm wrestle Microsoft, with agreements then locked up under NDA.

Microsoft refused to comment when asked by The Reg on the Windows 7 Starter Edition price, pointing to the NDA chastity belt that accompanies this SKU.

If Microsoft has bumped the price, it'll put a serious crimp in the appeal of Windows 7 on netbooks. OEMs margins are tight, and on a machine priced at $300, Microsoft will be taking a serious bite out of the margin that would have gone to the PC manufacturer.

In Microsoft's world, a price of between $45 and $55 might count as flat - or no increase. Leaked copies of Windows Vista Starter Edition are available for $52.

With the technology hurdle that hurt Windows Vista gone, that leaves just price as the barrier to OEMs using Windows 7 on netbooks. And for OEMs who had skipped Windows Vista Starter Edition for Windows XP Starter Edition, that price of between $45 and $55 per unit won't count as pricing stability at all. It'll be an effective increase.

The only card Microsoft has left in this game is application and hardware compatibility. Software and devices that consumers know and like will work with Windows on netbooks. This might compel OEMs to swallow the price.

Apart from that - and it's not an insignificant consideration - it'll be up to Ubuntu's chief sponsor Canonical and other Linuxes to lobby Acer, Asus, Dell, Hewlett-Packard, and others making netbooks. Those manufacturers will be concerned about their margins. ®

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