Microsoft’s Netbook Enigma – The New York Times

INSERT CREDIT A screenshot of the “libraries” feature in Microsoft’s upcoming operating system, Windows 7.

Forget the fancy new features of Windows 7. The operating system really stands out as something to watch out for due to its business implications for Microsoft.

Microsoft has said it’s proud that Windows 7 is light enough to run on netbooks, which isn’t surprising, because it’s downright embarrassing that Vista is too chunky to run well on the best-selling laptops out there.

But Vista’s bloat has provided Microsoft with a convenient pricing strategy to use on netbook makers. Microsoft could offer the old Windows XP for around $ 25 a piece, helping it compete with almost free Linux (PC makers pay Linux makers about $ 3 per computer for their efforts). Meanwhile, he could continue to sell Vista for around $ 75 a pop on bigger machines. Having two separate versions of Windows was helpful.

How will Microsoft handle this $ 50 gap when Windows 7 can run on regular netbooks and laptops?

Microsoft has tried to fix the potential Windows 7 netbook problem. On Friday it posted a blog post promoting Windows 7 as a netbook delight.

“Looking ahead, we can confidently say that whatever the evolution of netbook hardware, we are preparing to ensure that Windows 7 will run smoothly on them,” Microsoft said in the post. “We’ve been testing Windows 7 on laptops since before Windows 7 was complete, and our plan is to allow these small laptops to run any edition of Windows 7.”

Microsoft, however, is silent on the prices of these different editions. And anything it does to shorten Windows 7 for Netbooks will only narrow the performance gap with Linux.

Even more puzzled, Microsoft must explain to PC makers why the same version of Windows 7 costs $ 75 to run on a 14-inch laptop, but $ 25 to run on an 8-inch laptop, while ‘this is the same underlying code.

So far, consumers have shown their preference for Windows over netbooks, which reinforces Microsoft’s case. Linux went from almost 100% share in early netbooks to just 20% after Microsoft started bringing Windows XP to systems.

PC makers, however, have started to grasp a good thing with Linux. Just having Linux allows them to put more pressure on Microsoft. Plus, they can customize Linux to make their products stand out from the crowd.

In an article published Thursday, Matt Richtel and I talked about a next wave of netbooks based on ARM chips. It turns out that all of these systems will run on Linux because Microsoft does not have a consumer version of Windows for ARM chips.

(You should understand that Microsoft has an ARM-ready version of Windows 7 lurking in its labs.)

The presence of ARM-based machines will pose difficult questions for Hewlett-Packard and Dell. Do they venture into this niche or ignore it and let Acer and Asustek do all the experimentation?

As Sanford C. Bernstein analyst Toni Sacconaghi pointed out in a recent research report, the adoption by Asian PC makers of Intel’s Atom chip, netbooks and upcoming ARM products will put HP and Dell to the test.

“We see a risk that the Atom and other low-cost platforms allow these and smaller vendors to gain market share at the expense of large OEMs – and that their share gains may be difficult to reverse later, ”Sacconaghi said. wrote. “Additionally, aggressive price competition from smaller vendors could undermine the efforts of large OEMs to generate higher margins on lower-priced PCs. “

The PC market suddenly became exciting again.

About Jon Moses

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