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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: Awesome!
By pugz3d on 4/21/2009 1:26:45 PM , Rating: 3
Wow the posts here really escalated off into madness...
"Can't afford" is a bit off, but close enough.

The real point of the story is that without COMPETITION from Linux, your precious Windows XP netbook would cost you more for no other reason than they can get away with it.

So for the Linux haters - eat it, grow up, and show a little class.
Linux fanboys - settle down, it's getting closer, but you only get so much for "free".

I for one am starting to love Linux, and open source overall. I'm not a developer or programmer, just a Desktop Support type who doesn't like getting fleeced.

Great experience I had recently with my HP laptop running glorious XP. Tried to install HP Photosmart printer software, as my desktop mobo croaked. A 600MB package so I can use the stupid scanner and print... (I know the basic package is only 150MB, but thats still RIDICULOUS.) Same manufacturer for the 2 devices.... Software just stalls 5-10 mins in, hangs for at least half an hour, and then just blue screens the laptop, can't get in to safe mode, and eventually just reinstalled the monster.

Load up Ubuntu 8.10 live disc, and it doesn't ask me a single question, just works. Now, I didn't get the fancy multi-scan features of HPs bloatfish Photosmart Suite, but I could at least print and scan into some pretty useful apps that again didn't ask me a single question - JUST worked. I was friggin floored... Wireless drivers is another story for another time however :)

"Spreading the rumors, it's very easy because the people who write about Apple want that story, and you can claim its credible because you spoke to someone at Apple." -- Investment guru Jim Cramer

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