Opinion: Microsoft may shoot itself in the foot with Win 7 pricing

Computerworld - Believe it or not, I rather like Windows 7. I still think XP SP3 is what you want if performance matters most to you, but 7 does OK on the racetrack, and most of Vista's biggest annoyances have either been fixed or dumped. Technically speaking, Windows 7 is exactly what Microsoft needs in order to recover from its Vista fiasco. Too bad the company seems to want to shoot itself in the foot.

Although Windows 7 pricing hasn't been officially announced, the word is out -- the "word" actually being two words: higher prices. Whether you buy a single Windows 7 license or a few thousand, the expectation is that you'll be paying more.

Will this go over well? Let me check. Is the economy still a mess? Does anyone have much cash lying around? I don't think so, and neither do any of the companies that track such things. There's a reason why cheap-as-dirt netbooks have been the one hardware sector that has been showing some life: People can afford them.

Speaking of netbooks, it looks as if Microsoft is going to put a ton of restrictions on their use of Windows 7. Sources say vendors' choices will be Windows 7 Starter, Win 7 Starter for Small Notebook PCs and Win 7 Basic for Small Notebook PCs.

And Microsoft wants to define what a netbook is. According to it, a netbook has a 10.2-in. screen or smaller, no more than 1GB of RAM, a hard disk drive of no more than 250GB or a solid-state drive no bigger than 64GB, and a single-core processor no faster than 2 GHz. Oh, and while we're at it, the whole shebang has to use 15 watts or less, not including the graphics and chip set.

Well, at least the company has pulled its "no more than three apps" limit from the Starter Edition. Of course, with those hardware restrictions, you're going to be resource-crippled anyway.

I've got to wonder what Microsoft thinks it's doing. Its latest ad campaign focuses on the low price of PCs vs. Macs. Of course, what those ads don't tell you is that buying security software is an absolute requirement. Still, it sounds good.

But as desktop Linux becomes a significant challenger, Microsoft is losing its price advantage. Microsoft managed to snatch the netbook market away from Linux by reviving XP Home and offering it to OEMs for next to nothing. It's foolish of Microsoft to think it can hold on to that market with restricted hardware and bottom-end versions of Windows 7.

There was a time when Microsoft could shaft netbook buyers and vendors like that and end up the rich market leader. But it should beware of a trio of netbook-oriented Linux initiatives: Google's Android, Intel's Moblin 2.0 and netbooks powered by chips from U.K.-based ARM. Any one of those could threaten Microsoft: Android because Google is the one company that has a user reach as great as Microsoft; Moblin because Intel seems to be breaking up its Wintel partnership for new ones with everyone in desktop Linux; and ARM because netbooks based on its architecture may be the cheapest of all and Windows won't even run on them.

After Vista, Microsoft can't afford to blow it again. Steve Ballmer needs to learn that Microsoft will no longer get whatever it wants. Microsoft needs to make Windows 7 as attractive as possible not just to tech-heads, but to individual users and business people who make PC buying decisions. High prices and crippleware, combined with pressure at the high end from Macs and at the low end from Linux, may end up injuring Microsoft's already precarious business even more than Vista did -- and that's saying something!

Steven J. Vaughan-Nichols has been writing about technology and the business of technology since CP/M-80 was cutting-edge and 300bit/sec. was a fast Internet connection -- and we liked it! He can be reached at sjvn@vna1.com.

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