Microsoft's determination to wrest control of netbooks from Linux has seen it drop the bulk price of Windows XP for the systems to under $15 per copy, according to a leak from an unnamed source. Although Microsoft has never publicly disclosed its pricing for netbook licenses, the Wall Street Journal now hears that a copy of XP Home for the budget portables is less than a third the price of a Windows Vista copy for a typical notebook, which costs the PC maker between $50 and $60 per copy in large batches. The price is well below the usual $30 asked for the Starter Edition of Windows, which is meant for PCs in the developing world.
The pricing level partly explains Microsoft's push to complete Windows 7 and use its Starter Edition as the foundation for netbooks. The newer OS release is expected to command a higher price and will also be the first to have a clear upgrade path to more expensive editions, as all versions should still run well on low-end hardware like Intel's Atom chip. Last fall, Microsoft posted significant declines in Windows revenues and attributed it largely to strong sales of netbooks that undercut its normally much more profitable business.
Cutting the price of Windows for PC builders has been virtually necessary for Microsoft to maintain control of the low-cost computer market in the past 1.5 years. For the first few months after the original ASUS Eee PC launched in late 2007, Linux was the dominant operating system on netbooks as the usually free license let companies drop the price significantly lower than usual. Windows appeared quickly, but was often considered a premium option due to a relatively very high license cost. Linux is still frequently seen on netbooks but is usually only pre-loaded for the most basic systems, where price remains an important factor.
However, PC makers like Acer are already expressing doubts about whether Windows 7 Starter will necessarily be popular. It officially only allows running 3 apps at once, and while it often allows multiple sessions of the same app (such as for Internet Explorer), Acer's product marketing VP Sumit Agnihotry tells the Journal that it may be a 'tough sell' when the app limit is a downgrade from XP. Linux also doesn't face the same restriction.
Despite Microsoft's official claims of a Windows 7 launch near the 3-year anniversary of Vista's early 2007 introduction, the company has sped up development and should have a release candidate in early May with a final version ready by the fall.