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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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RE: linux
By smackababy on 4/20/2009 3:12:09 PM , Rating: 2
XP will be gone. My point was when given a choice between a new OS (Windows 7) and an OS the average user has heard little if anything at all about (Linux). I know people who've used computers for the last 10 years, but couldn't answer what Linux is besides a strange cat with funny years. I doubt they'll lose a lot of marketshare when the switch happens. Especially, if Windows 7 can run smoothly and look pretty.


RE: linux
By sprockkets on 4/20/2009 3:17:37 PM , Rating: 2
It seems nowadays that people are trying a new OS and liking it, OSX. More frightening is people are trying the iphone who would never get a pda phone ever, and are liking it.


RE: linux
By smackababy on 4/20/2009 3:31:06 PM , Rating: 2
Much more frightening is I see a slew of 14 year olds with Blackberries and such. Who needs phones like that? Not high schoolers. Why do you think the iPhone is such a popular smart phone? It isn't made for people who would need one.


RE: linux
By Alexstarfire on 4/20/2009 10:38:28 PM , Rating: 2
Because it's becoming the Ngage, and it's doing a far better job too.


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