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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 TomZ on 4/20/2009 5:29:44 PM , Rating: 1
...more suitable than Windows 7? How so?

Windows 7 combines the security benefits of Vista with the efficiency of XP as well as a more streamlined user experience than both. XP doesn't even come close.

RE: linux
By stromgald30 on 4/20/2009 6:41:15 PM , Rating: 1
I'm not sure about the efficiency part. Windows 7 is more resource hungry than XP by far. For netbooks where you want small and cheap hardware, Windows 7 would tax the hardware much more, which can also reduce battery life.

RE: linux
By TomZ on 4/20/2009 6:52:24 PM , Rating: 1
We'll the benchmarks...

RE: linux
By mindless1 on 4/20/2009 11:15:34 PM , Rating: 2
The ones deliberately designed to highlight where Win7 is faster and ignore where XP is? Remember a benchmark has to be applicable to the use.

As someone who has installed the last Win7 beta on a notebook far faster than a Netbook and immediately noted it's sluggishness, there is no doubt XP is faster for the general purpose uses a netbook is intended for, as well as reducing cost via lower OS footprint, smaller SSD needed to run it.

RE: linux
By TomZ on 4/20/2009 11:17:19 PM , Rating: 2
I'm going to have to call BS on that. I've got Windows 7 running on a few machines, and there is nothing sluggish about it.

RE: linux
By bupkus on 4/20/2009 8:00:50 PM , Rating: 2
reduce battery life

Worse than XP?

RE: linux
By stromgald30 on 4/20/2009 8:21:09 PM , Rating: 2
The minimum system requirements of Vista/Win7 are significantly higher than XP. Whether that translates into more power consumption by background processes . . . we shall see when the benchmarks come out.

I'm not saying that most netbooks will have XP or should have XP. I'm convinced that Win7 is a much better OS. Better security, more user-friendly, etc. I just think it'll cost the consumer something in terms of raw performance and battery.

“So far we have not seen a single Android device that does not infringe on our patents." -- Microsoft General Counsel Brad Smith

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