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Microsoft Makes $15 Per Windows XP Netbook

By - Source: Tom's Hardware US | B 30 comments

Reports today say that despite the fact that Microsoft’s Windows XP is near-defacto operating system on netbooks today, the Redmond company makes less than $15 per license sold.

Recent NPD data says that 96 percent of all netbooks sold throughout February 2009 came with Windows. Presuming that the vast majority of Windows-based netbooks run Windows XP rather than Vista, that means Linux is running on a mere 4 percent of netbooks. Microsoft is apparently trying to grab that last 4 percent.

The Wall Street Journal today cites people familiar with the matter as saying that Microsoft takes in less than $15 per netbook for Windows XP once marketing rebates are taken into account. This is compared to the $50 to $60 it receives for PCs running Vista. So why is Microsoft so eager to grab the entire market?

It’s a well known fact that Microsoft is planning to offer a stripped down version of Windows 7 developed specifically for netbooks. That said, while Windows 7 Starter is said to be “optimized” for netbooks, the widely reported fact that it can only run three applications at once is something many people have been wary of. If we fast forward to a time when an consumer is given the choice of running no more than three apps or using Linux, which would you choose? An XP user might not be a Windows 7 user, but a customer is a customer, right?

How many programs can I run at once? How many programs can I run at once?

The WSJ cites Brad Brooks, corporate vice president for Windows product marketing at Microsoft, as saying Starter was created so that the company could offer Windows 7 on even the least expensive netbooks. Brooks maintains that despite its limitations, it is an easier and more stable OS than XP.

"When you see Starter on netbooks, there are a lot of impressions that it is limited," said Mr. Brooks told WSJ. "It's a pretty robust operating system for customers at the price points we're giving it to them," he finished.

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  • 6 Hide
    theuerkorn , April 20, 2009 4:18 PM
    I think beyond technical reasons, most users are accustomed with Windows in one flavor or another. As most are not enthusiasts, but require for the equipment to simply work and know how to do things, it's a gamble for those to switch systems. The other system might be better, but being different requires new learning of things we already spent time on before.

    Just take OSX for an example. If you "grew up" on Windows you will be lost and at least initially unable to do simple things. You're basically programmed to expect it to be a certain way. I had a similar problem when going Amiga -> PC and I was simply bummed why I couldn't simply ... well I learned my ways around too.

    Of course not to forget about available software and we might have invested in programs already. Switching systems also means new expenses for programs you already paid for (even if that ignores that most of those occasionally require upgrading too).
  • -1 Hide
    slickuser , April 20, 2009 4:43 PM
    thats about right. Their OS is worth only $19.99 IMO
  • -9 Hide
    A Stoner , April 20, 2009 5:13 PM
    "It's a pretty robust operating system for customers at the price points we're giving it to them,"
    Offering would be a better way of saying this. But when you put into the context that this is written, I cannot help but think that the real thought behind the "we're giving it to them" is more closely aligned with the thought further up in the article about Microsoft taking that last 4% of market share. This leaves me with the feeling that the person making that statement is thinking "Since we are forced to sell at low price points, we are going to make sure we are the only game in town and force the customer to take what they deserve, which is a peice of shit operation system that is so pathetic that they will eventually be forced to fork over the total cost of their netbook just to get an operating system on it that is usefull, which of course will be the easy to upgrade Windows 7. Since we have pre-empted any companies from packaging their netbooks with any other operation system, people will be too scared to try anything other than what we are offering, cause they are all to stupid to figure it out on their own."

    I think it is a brilliant strategy, let's see how it pans out for them. I for one went out and bought Windows XP professional x64, so now I have a 64 bit operating system that is not Vista or Windows 7. According to many reports, it will have support until 2015, which means I will be able to replace it with Windows World Domination Edition 11 or 12 depending on if I want to get the tested SP1 version or a raw untested version.
  • 0 Hide
    Yoder54 , April 20, 2009 5:18 PM
    slickuserthats about right. Their OS is worth only $19.99 IMO


    Must must be talking about Argentina prices, where the rate of inflation is > 23%.

    The real value would be about $9.99 USD. The Windows Experience...Priceless.
  • 3 Hide
    A Stoner , April 20, 2009 5:19 PM
    theuerkornI think beyond technical reasons, most users are accustomed with Windows in one flavor or another. As most are not enthusiasts, but require for the equipment to simply work and know how to do things, it's a gamble for those to switch systems. The other system might be better, but being different requires new learning of things we already spent time on before.


    The problem for Microsoft is that these people learned on Windows 95 or XP, and the new interface is no where near the same as those systems. This leaves opportunity where if someone were to want to break out of the Microsoft loop, this is the right time, because if you are going to relearn a whole new interface, and you have not been liking Microsoft, learn something that is new as well as not Microsoft. Microsoft is smart to work hard to prevent users from getting their hands on competitor's at this point in the software/hardware cycle. I am sticking with Microsoft, but I am sticking to the older XP iterations for now.
  • -4 Hide
    WheelsOfConfusion , April 20, 2009 5:27 PM
    Also, many companies just aren't offering models with Linux on them. I see a lot of people commenting on these stories saying "I bought it with XP, but first thing I did was put Ubuntu/SUSE on it!" And there have been complaints of the Linux versions available not being configured correctly, so sometimes hardware doesn't work out-of-the-box.
  • 3 Hide
    Anonymous , April 20, 2009 5:27 PM
    This is a link to an article at linuxdevices.com (Canonical disputes Microsoft netbook claims) which points out discrepancies with the 96% claim, although it acknowledge that the linux netbook market share is slipping.
    *http://www.linuxdevices.com/news/NS5701694759.html

    "LeBlanc's claim that Microsoft Windows products, primarily Windows XP, run on 96 percent of netbooks might have been based on December 2008 through February 2009 numbers cited by the NPD Retail Tracking Service. While it does appear to be true that Windows XP has been gaining market share in recent months over Linux, the NPD numbers track in-store sales from brick-and-mortar retail stores, where Linux options are often not available, and do not appear to cover online sales. What's more, the NPD numbers only cover U.S. sales, where Windows predominates, while Linux is more popular in Europe and elsewhere."[...]"If Le Blanc's 96 percent claim is true, it would represent a phenomenal turnaround for Windows. In November, Bloomberg.com reported that Linux gains in netbooks were hurting Microsoft's bottom line, and quoted Microsoft as estimating that Windows products run on about 70 percent of netbooks."[...]"Despite the limitations of the NPD report, other anecdotal evidence, as well as a new study by Ovum, appears to suggest a slippage in Linux netbook market share. Ovum did not publicly report exact percentages, but reported that the Linux netbook share has dropped considerably in recent months. "
  • 2 Hide
    JimmiG , April 20, 2009 5:29 PM
    I would rather buy a netbook with XP than one with Win7 Starter and the 3-application limit. I regularly run 5-10 applications at once on my XP netbook and almost never less than 3.
  • 0 Hide
    thundercleese , April 20, 2009 5:51 PM
    I have my wife's Dell Mini 9 (with 1GB, then later upgraded to 2GB RAM) running Windows 7 Beta with no problems. In fact, it runs better and faster than with the pre-installed XP. We've had Firefox open with 5+ tabs, OpenOffice.Org, Adobe Photoshop CS3, Winamp and 3 gadgets running at the same time with Aero on top of that. The stupid Intel Atom architecture can keep up, so why have a crippled version of Windows 7 out?
  • -7 Hide
    slickuser , April 20, 2009 5:59 PM
    >> The real value would be about $9.99 USD. The Windows Experience...Priceless.

    I bet Windows experience is priceless .. also called hidden costs or Microsoft tax. Have fun with crappy Windows.
  • 3 Hide
    69camaroSS , April 20, 2009 6:03 PM
    Microsoft sucks! There they are trying to make us pay for a purposefully crippled program, and then they ransom the real version at an unbelievably high price. That is the problem with software companies. Their prices are all based on perceived value, and in my opinion, Microsoft perception of Windows is way off.

    I would get Linux on priciple alone.
  • 2 Hide
    solymnar , April 20, 2009 6:03 PM
    thundercleese The stupid Intel Atom architecture can keep up, so why have a crippled version of Windows 7 out?


    Because the average user is relatively clueless about hardware and software but everyone can read the price tag and likes the idea of getting something new.

    The sales pitch is a breeze:

    consumer
    "Well I don't know...I had a friend tell me to watch out for some win7 limitation thingie. What's that all about?"

    sales
    "The version of windows on this laptop lets you run 3 things at once, which is more than enough to do pretty much anything you want it to do. Better still, if for whatever reason you felt that you wanted more, you can upgrade relatively cheaply at any time. The main point is it saves you money while keeping up with modern performance."

    consumer
    "Well OK...that sounds pretty good."

    Lowest common denominator approaches are often very very successful.
  • 0 Hide
    audioee , April 20, 2009 6:07 PM
    Maybe MS should go the route of some other software licenses with a multiple computer package for home use. 3-5 licenses for a reasonable price (NOT 3X THE PRICE OF ONE LICENSE).

    1) Office(gaming) computer
    2) Media Center PC
    3) Netbook
  • 1 Hide
    69camaroSS , April 20, 2009 6:13 PM
    audioeeMaybe MS should go the route of some other software licenses with a multiple computer package for home use. 3-5 licenses for a reasonable price (NOT 3X THE PRICE OF ONE LICENSE). 1) Office(gaming) computer2) Media Center PC3) Netbook


    Keep dreaming. They only make money if you buy a copy. That would cut 66% of their profits.
  • 3 Hide
    bourgeoisdude , April 20, 2009 6:18 PM
    Quote:
    So why is Microsoft so eager to grab the entire market?


    I think it's more about MS holding the market rather than gaining. Think if we asked this question back in the IE6 days regarding their web browser, and MS had immediately responded to Firefox's release with an updated browser of their own. I mean, why bother? IE had over 94% of the internet browser share, right?

    It's not that MS would have needed the extra 6% of browser share, but that they needed to maintain their dominance. Left unchecked, Linux will seize any and every opportunity it can to start gaining market share over Microsoft. Sounds to me like MS is learning from their mistakes.
  • 3 Hide
    mitch074 , April 20, 2009 6:24 PM
    My next netbook will run on ARM.

    Windows can't run on ARM. Linux can. Xorg can. Firefox can. Xfce can. OpenOffice.org can. VLC can. Pidgin can. Audacious can. Rhythmbox can. The Gimp can. OpenArena can.

    Having covered OS kernel, graphical interface, video playback, audio playback, image manipulation, IM, 3D fraggin' and MP3 player synchronization, I think I've covered the whole gamut of uses a netbook can have.

    MS can keep its pricey Windows-neutered costly netbooks, I'll use something lighter, less power-hungry, more versatile and - even better - LESS expensive.
  • 1 Hide
    theuerkorn , April 20, 2009 7:14 PM
    A StonerThe problem for Microsoft is that these people learned on Windows 95 or XP, and the new interface is no where near the same as those systems. This leaves opportunity where if someone were to want to break out of the Microsoft loop, this is the right time, because if you are going to relearn a whole new interface...


    Actually, I am not so sure that Vista is really that different from XP other than looks. Granted Vista is hiding stuff in different places and more restrictive to advanced users, but otherwise it's really a window-dressed XP to the end user (nevermind the major core overhaul). I mean, relative to getting used to OSX's single button mouse or window handling, most Windows variants are almost identical (this works both ways). Even Windows 7 doesn't look that different than a slightly modified theme for Vista. I know, the evil is in the detail, but that's after the purchase.

    Btw., I have toyed with the idea of switching to OSX, but have way too much invested in Windows software of which only a few offer sidegrades and that alone makes the switch a fairly expensive thing. (Yes, I actually pay for the software I use!) Let alone that I build my computers anyway, and so far there is no legal way to do that for OSX. Linux is, but here i am really stuck as most software I need is not available.
  • 0 Hide
    mforce2 , April 20, 2009 7:31 PM
    mitch074My next netbook will run on ARM.Windows can't run on ARM. Linux can.

    I agree , I want one of those ARM netbooks too , I just think they're cool. While I do need Windows on my PC for various reasons I can live without it on my netbook and just be happy :) .
  • -1 Hide
    jsloan , April 20, 2009 7:34 PM
    wow, what a deal... take that eu. we licensed microsoft embedded xp os and we paid i think $69 / seat. we made very nice custom build where we picked exactly what we wanted in the embedded device. very nice tools, very easy to use. they have a vistual studio like software where you go through wizards and pick what features you want in the build and then configure the settings exactly how you need them, is's amazing, best i've seen, better than anything i've seen in linux world to create your own distrubutionm, they even have nice videos you can watch and learn how to do.
  • 1 Hide
    Anonymous , April 20, 2009 8:52 PM
    I wished they would disable those video previews and fancy aero instead,and still allow at least 5 applications to run! Upto today there's no real definition of '3 programs'.
    Like if I use a mouse driver, that will enable scrollwheel and tapping on the mousepad, does that count for one program?

    Do you think there will be '3 program hacks' out soon to unlock the capacities of netbooks?
    3 programs could mean adobe photoshop, a video editor, and a music studio, but could also mean minesweeper, calculator, and a clock?
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