In early April, Microsoft made a lot of OEM and consumers happy with the announcement that Windows XP Home would live on in ultra-low-cost PCs (ULPCs) until June 30, 2010. The rise of such low-cost machines as the ASUS Eee PC -- which primarily runs on a Linux-based operating system -- led to Microsoft's decision to offer Windows XP to OEMs past the already established June 30, 2008 cutoff date.
At the time of the announcement, the only restriction seemingly placed on the reprieve for Windows XP Home seemed to be that the operating system could only be sold on ULPCs. IDG News, however, came into possession of an internal document to OEMs which detail the full extent of the restrictions.
In an effort to protect its Windows Vista operating system, Microsoft is requiring OEMs to abide by the following rules:
In exchange for abiding by these restrictions, Microsoft will charge OEMs just $32 for each license of Windows XP Home used in machines sold in developed markets. For emering markets, that price drops to $26. The deal gets even sweeter if an OEM is a part of Microsoft's Market Development Agreement -- this arrangement cuts another $10 off the license cost of each copy of Windows XP Home.
"It allows PC makers to offer a low-cost alternative, and it prevents eroding of pricing and margins in the mainstream OS market," said analyst Roger Kay, president of EndPoint Technologies Associates.
"[Low-cost PC makers] have made some good inroads with open-source, and Microsoft wants to put a stop to it," said a computer OEM official who wished to remain anonymous.
As the official noted, there is no doubt that Microsoft wants to squash any chance of Linux getting a grip on the low-end PC market. There were just 500,000 ULPCs sold during all of 2007 -- that number is expected to rise to 9 million by 2012 according to IDC. Microsoft, however, is much more optimistic and says that between 10 million to 13 million units will be sold in 2008 alone.