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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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By Hacp on 4/20/2009 3:30:48 PM , Rating: 2
The big problem here is intel. It requires certain sizes for netbooks. At sizes of 10 inches or less, the netbook makers can't charge a premium. If these netbook guys were able to freely experiment and offer Ion+Aton+3gb+12.1+DVDRW for around 550-600 dollars, I'm sure people will jump to buy them.

I've always wanted an ultraportable 4 pounder, but since Intel charges so much for their ULV chips, I'm not able to afford one. But if I see a lower powered equivalent, I'll jump to buy one.




By TomZ on 4/20/2009 3:35:20 PM , Rating: 4
There's no way I would pay $600 for an Atom-based machine. They are great processors, but far slower than Core 2, and not to mention they are single-core compared to most Core 2's being used today in laptops which are dual-core.

I personally don't see a market for traditional netbooks at that price point.


By Taft12 on 4/20/2009 3:48:20 PM , Rating: 2
Bang on regarding Intel's worries. Dell will be offering a system with the features you list at that price point in no time.

How much does Intel wish they had never let the Atom genie out of the bottle? A dirt cheap good-enough CPU released just in time for a recession. The timing flat-out demolished the low-to-mid range CPU market.

Small steps like raising the price and "shortages" aren't going to help. If they slay the goose that laid these very inexpensive golden eggs, ARM-based devices will rush right in to take their place.


By jcbond on 4/20/2009 4:03:09 PM , Rating: 2
Hmmm...
At 5lbs, you can get an HP with 14 in screen + DVDRW for $600. But you're right about one 4lbs. You'll pay another $150, and would then need to purchase an external optical drive.
I'm not sure I see the attraction. With something that has that tiny of a screen, I wouldn't use it for much, and I would definitely want a primary PC.
What is it that you are looking for? And would an external optical/netbook combo reach it?


By mindless1 on 4/20/2009 5:22:54 PM , Rating: 2
12", Atom 330, GN40 chipset, 2GB memory and XP for $350 should be their target.

It'd be even more interesting if SSD controller manufacturers can get their act together and come up with a cost-sensitive higher performance solution so a smallish on-board SSD would raise the price by only $50 more. Right now there are 32GB PCIe SSDs for $70, then subtract the cost of the HDD it replaces, so when flash chip density doubles again that might be an attainable target.

Leave out the DVDRW to reduce cost and size, most people won't need to burn discs on the go and won't expect a netbook to be the only computer they own so they already have another means of burning discs.


By noirsoft on 4/20/2009 10:33:47 PM , Rating: 2
quote:
12", Atom 330, GN40 chipset, 2GB memory and XP for $350 should be their target.


With 2 GB of RAM, it would easily run Vista with no noticeable degradation in performance from XP, and in some cases improved performance over XP. 7 would be an even better choice, but either way netbook manufacturers should really start moving off of XP and onto newer/better versions of Windows.


By mindless1 on 4/20/2009 11:22:07 PM , Rating: 2
False. With Vista where is less memory left over for the filecache.

With 2GB, and 4GB in a laptop with higher performance than a netbook, both Vista and Win7 are noticeably laggy compared to XP.

XP is the better version of windows in this context, newer means very little when the changes aren't central to the typical needs of a netbook user, rather contrary to them.

Here's a shocker: Win2k, were it not for minor abandonment of newer applications and drivers, would be even better still.

Your needs are not most people's needs, apparently, as they have chosen XP over Vista even when 2GB of memory can be had for under $20.


By noirsoft on 4/21/2009 11:30:47 AM , Rating: 2
Not at all.

I run Vista on a netbook with 1.5 gb of Ram, and it runs without any noticeable lags. With Aero, the machine is less laggy in some cases because drawing of screen items doesn't compete for the CPU as much.

I would say that the main chages in Vista (better security, better stability) are appropriate for everyone, especially on a machine that is portable. I wouldn't take an expensive laptop overseas, but I take my Netbook, so having it run properly all the time, even if connected to the internet via a dodgy Russian internet cafe, is important.

The netbook manufactureres have chosen XP over Vista because they want to make the bottom-line price as little as possible, so the extra money spent on the RAM and Vista license may make the difference between a sale and a miss. That and the FUD spread by people like you who think that Vista won't work (or is somehow inferior) on a netbook.


By Hacp on 4/21/2009 2:14:58 AM , Rating: 2
Why would you leave out the DVD-RW when you have a 12 inch frame? They can design a dvd-rw that slides out to reduce the weight, but a dvd-rw should be default.


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