Microsoft must perform a tricky balancing act as it tries to keep Windows on netbooks but not get stuck in a market that generates little revenue, say industry analysts.
The software giant has still not disclosed how much it plans to charge PC makers for Windows 7 on netbooks. But an increase over the current $15 price for Windows XP is inevitable, says Richard Shim, PC analyst at research firm IDC.
[ Is Windows 7 worse on netbook battery life than XP? | Can a netbook serve as your primary PC? When does a netbook stop being a netbook? | What netbooks should your business consider? The InfoWorld Test Center uncovers the best netbooks for business. ]
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PC makers will face pressure to keep price points down, Shim says, even as Microsoft charges them more for Windows 7 on netbooks than for XP. Microsoft plans to make the limited Windows 7 Starter version and Windows 7 Home Premium available on netbooks, with Home Premium likely costing more.
To be clear, Microsoft has not announced how much it plans to charge PC makers for any versions of Windows 7. Microsoft executives are saying that the average price that PC makers pay for Windows (across all versions) is $50. It currently charges PC makers $15 per copy of Windows XP on netbooks.
Are more powerful netbooks still netbooks?
Netbooks are still about price and portability, but that could change if consumers and businesses demand more power from small form-factor machines, Shim says.
"Netbooks could soon evolve from being price-focused to more feature-focused if users demand it," says Shim.
If that feature infusion happens, vendors would certainly raise the price, at which point people will stop calling the devices netbooks, says veteran analyst Roger Kay, president of tech research firm Endpoint Technologies.
"This is what both Microsoft and hardware companies want," says Kay. "They want to sell ultrathin laptops for $500 rather than netbooks for $300. But users like netbooks."
Indeed they do. IDC predicts netbook sales will more than double this year, from 11.6 million units in 2008 to 26.5 million in 2009.
Keeping Windows XP alive
To stay in the netbook game, Microsoft has agreed to continue licensing Windows XP Home Edition to netbook hardware makers for one year after Windows 7 ships on Oct. 22.
The catch: Microsoft doesn't actually want Windows 7 Starter to gain steam on netbooks, Kay believes.
"Microsoft will offer PC makers Windows 7 Starter on netbooks probably at a price close to what it now charges for XP, but what it really wants to do is upsell to Windows 7 Home Premium on ultrathins or standard-size notebooks to make more money," says Kay.
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Download now »How quickly we loose sight of a concept when M$FT kicks in the door! IF you "need" a netbook, (small form factor, light weight, light function, fast, rugged, long battery life), THEN you do NOT need Windows (large, bloated, full function, resource hog, net insecure, but still does o.k.{sort-of} with batteries)! Conversely, if you must have the Windows "experience", just deal with the slightly heavier, slightly bigger device, go on calling it a "netbook" because M$FT calls it that (you've already gotten a taste for that cool-aid anyway), and be happy. The netbook without the M$FT Tax will always be less expensive. deal with it!!!
Microsoft powered NetBook is an oxymoron, Insisting on one is Doublethink. Insisting on the Windows "experience" on a handheld makes you the punchline in one of life's little jokes.
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I think this could reinvigorate the netbook market. I have an Asus eee PC 701: small screen, small keyboard, 512 MB RAM, 4 GB SSD, running a Linux variant (in my case, eeebuntu 3.0.1 nbr; I don't like the Asus Xandros setup). I have found that FireFox and OpenOffice on this machine do everything I need to do, and do it well. By "reinvigorate", what I mean (and what I hope) is that MS Windows will take over the more expensive netbook/ultrathin laptop market with bigger screens, hard drives, keyboards, etc., for those users who want that experience, but that some manufacturers will see that a market exists for a small netbook, whose screen, drive, and keyboard have not grown too large, and that run some version of Linux, much more cheaply than any Windows netbook. It would be nice to see someone coming out with a $200 Linux netbook; after all, the "big" netbooks being sold now are about the same price that I paid for my "small" netbook, so hopefully a "small" netbook could be made more cheaply today. It would be interesting to see what kind of demand exists for something like that today, something just a little bigger (but not much) than my eee PC 701, but at around half its original cost. With Microsoft pushing manufacturers to go for more expensive machines, maybe someone will try this lower market. Asus did pretty well (with regard to sales) when they first came out with the eee PC.