MS Slashes Price of Windows on Netbooks

Microsoft has cut the price of Windows by almost 80% for the special netbook edition. However, the price is for manufacturers, meaning consumers won't necessarily see all of the savings.

Until now, computer makers normally had to pay around $70 to include Windows on their machines. Microsoft has now started offering Windows for just $15 to firms making netbooks. Of course, there's no guarantee manufacturers will pass all of those savings on; depending on how competitive the market is, they may attempt to keep back some of the $55 reduction for themselves.

Microsoft feels the price cut is necessary because of the success of open source Linux systems on netbooks. The computers are designed to be cheap and ultra-portable and, while full-featured PCs, mainly used for Internet access.

Linux a Threat

Linux has two advantages in the netbook market.

The low price of the netbook hardware means that the cost of the operating system becomes a much heftier and more noticeable chunk of the overall price. That said, the relatively low-end hardware specifications of netbooks means Windows will likely run sluggish, even though many of its features aren't really necessary.

Those advantages haven't caused major problems yet for Microsoft: 96% of netbooks in the U.S. run Windows right now. But with Linux owning a 25% share worldwide, the competition has some breathing room. (Source: computerworld.com)

Unlockable Extras

Naturally there's not much profit in selling Windows for $15, but Microsoft is planning to use it as a promotional tool.

With Windows 7, Microsoft plans to distribute the system so that three different editions are on each computer sold with the basic version. The user will only have access to the basic version, but can pay to upgrade it to a Premium or Ultimate edition with a code rather than having to download it or install it from a disk (a big problem for netbooks, which come without a DVD drive). (Source: businessweek.com)

Although Windows 7 is slimmed down compared to Vista, that's still a lot of disk space for all three editions. If Microsoft does use this tactic, it risks leaving customers with less disk space, but even worse: doing so with software they likely will never want or use.