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Customers may love netbooks, but with Microsoft forced to sell netbook licenses for less than $15, it could find its revenue falling by more than two thirds if netbooks were to continue their wild growth and come to dominate the market.  (Source: CrunchGear)
Microsoft is winning more marketshare at the expense of its sales prices

One classic debate in the computer industry is the importance of volume versus price.  A company like Apple Inc. revels in high-priced offerings, and even though its volume has suffered of late, its stock has been soaring due to its high sticker prices, as PC sticker prices fall. 

Microsoft, on the other hand, takes the opposite approach, shooting for volume despite sinking prices, something other analysts favor.  Microsoft is aiming to conquer the ultra-low and low-cost markets, which primarily revolves around the netbook and MID (mobile internet devices) industry.

After netbooks flirted with bringing Linux adoption to the masses, Microsoft quickly pounced on the opportunity, pushing copies of its lean, proven Windows XP operating system onto the market.  Today, over 96 percent of netbooks ship with a Windows-based operating system.  And the move couldn't have come too soon, if Microsoft wants to retain its dominant position.  Estimates by leading market researcher Gartner Inc. predicts that 21 million netbooks will ship in 2009, growth of 80 percent, while overall PC sales sink 11.9 percent.

What is impressive, according to a recent Wall Street Journal report, is just how low Microsoft is willing to price its OS's to stay in the netbook game.  The report cites that Microsoft is offering netbook manufacturers licenses for $15, far less than the standard OEM price of $50 to $60 per Windows Vista license.  The estimate even falls far below Microsoft typical Vista Starter Edition prices of approximately $30 per license.

Microsoft faces a real dilemma as it tries to market the Windows 7 Starter Edition to the netbook market.  Not only will it be priced higher than Windows XP, but it will have a three program limitation, which could prove very constricting.  And upgrading to a more functional Windows 7 version might be desirable but would further raise the cost.

On the other hand, Microsoft only plans on continuing to sell Windows XP licenses to netbook manufacturers until 2010.  However, when the cutoff comes in 2010, it risks losing manufacturers to Linux distributions, if it doesn't offer cheaper licenses.

Thus Microsoft finds itself in the same mess that hardware manufacturers find themselves in when it comes to netbooks.  They have created a monster, which consumers love, but one that doesn't love the manufacturers back, with razor-thin profit margins. 

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The hypocrasy of Windows vs Linux, and Apple
By sapiens74 on 4/20/2009 2:51:24 PM , Rating: 2
Microsoft argues that MACS are too expensive, but notebooks, a large portion of the cost is OS, AV and Office suites all of which have free alternatives.

I would love to see a Linux commercial challenge this

By mondo1234 on 4/20/2009 2:59:24 PM , Rating: 2
I was also wondering if MS had given Canonical any ideas for a Ubuntu advertising campaign (funded by Google)

By stromgald30 on 4/20/2009 3:15:30 PM , Rating: 2
Linux commercial? And how would Linux distros pay for the air time? I think Red Hat might be able to advertise, but I doubt they'd want to for the general population. Ubuntu should, but I'm not sure if they could afford it.

Cost isn't the real issue. It's value. The value of having Microsoft software with "decent" support is important for the typical netbook buyer even if it adds $100-150 to the cost. With Apple, you're getting less bang for your buck because they increase the price by $800 while only giving you maybe $300 more in improvements.

By omnicronx on 4/20/2009 4:01:18 PM , Rating: 2
Microsoft argues that MACS are too expensive, but notebooks, a large portion of the cost is OS, AV and Office suites all of which have free alternatives.
OS = 15$
Office Suite = Most netbooks don't come with one
AV = Most netbooks don't come with one.

End result: Use free software just as you would with linux.
Perhaps Open Office and AVG.

Total cost for more functionality than Linux = 15$.

Nothing wrong with nix, I always have at least one box with the latest and greatest just to keep up with the times, but this is the smartest move MS has ever made. Expect prices to fall $50+ on netbooks within the next year. Thats the great thing about PC's, competition between PC manufacturers drive the costs down.

By mindless1 on 4/20/2009 5:25:24 PM , Rating: 2
Many sub-$800 notebooks (highest selling category) don't come with expensive Office or AV, they offer limited period trialware versions of these which "might" even make more money for the laptop seller than if nothing were on it.

"And boy have we patented it!" -- Steve Jobs, Macworld 2007

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