Analysis: Microsoft could cut Windows 7 list price to $100

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Computerworld - Microsoft could drop the price of Windows 7 to around $100 when it announces retail prices later this month, according to calculations based on an earlier Vista cost-cutting move.

Although Microsoft is not expected to go public with Windows 7 retail prices until next week, if it drops them by the same percentages it did in February 2008 when it cut U.S. prices for three editions of Vista, the upgrade to Windows 7 Home Premium could be $106.

If it does cut prices, Microsoft's motivations could range from a recognition of the recession's impact on consumers to a desire to move as many users as possible to Windows 7 -- which has been generally praised by reviewers -- to stem defections to other platforms, such as Apple's Mac OS X.

In that Vista price cut, Microsoft dropped the list prices of Vista Home Premium Upgrade, Vista Ultimate and Vista Ultimate Upgrade in the U.S. by 18.8%, 20% and 15.4%, respectively.

Vista Home Premium Upgrade, which had been priced at $159, fell to $129 in February 2008. Vista Ultimate Upgrade, meanwhile, dropped from $260 to $220. In other markets, such as the U.K. and the European Union, prices fell even more: Home Premium Upgrade was slashed by 46% in the EU.

Using the 2008 percentage price cuts for Ultimate as the basis for further reductions would put Windows 7 Ultimate at $256 and Windows 7 Ultimate Upgrade at $186.

Those calculations, however, present problems with the pricing of Windows 7's other edition, dubbed Professional, the replacement for Vista Business in the line-up. Microsoft has been adamant that each version of Windows 7 will be a superset of the one immediately lower on the price/feature ladder. Such a strategy would hint at prices set accordingly; in other words, Business would be priced higher than Home Premium but lower than Ultimate.

Because Microsoft declined to cut the U.S. prices of Vista Business or Vista Business Upgrade, however, relying on the 2008 decreases means that, by Computerworld's calculations, Windows 7 Professional would remain at $300 and Windows 7 Professional Upgrade at $200. That's unlikely, given that those numbers would price Professional higher than Ultimate.

Another tack that Microsoft could take would be to simply cut prices for all editions by the same percentage, thereby lowering prices while still keeping its tier structure intact. In a scenario where the company cuts prices 10% from the current Vista list, for example, Windows 7 Home Premium Upgrade would list at $117, while Professional Upgrade and Ultimate Upgrade would be priced at $180 and $198, respectively.