5 ms·

You may be right in saying they haven't learned much from Vista, but I think your 'just have two versions' argument is overly simplistic. Today MSFT sells Wind

You may be right in saying they haven't learned much from Vista, but I think your 'just have two versions' argument is overly simplistic. Today MSFT sells Windows Home/HP for $x to lots of OEMs, who don't like paying that price, but don't have much choice, as their users 'want' Windows (want='think they want, because they dont know anything else'). OEMs say to MSFT 'we wont pay $x for Windows on netbooks, it's too expensive, sell it to us for $y'. But if MSFT sells Windows for $y for any PC then they lose $(x-y).(# of non netbook PCs), which would massively hit their share price TODAY. They can't do that, so even though they know that one day they will have to give up the $x price they do what they can to keep that price as long as possible (aka cash-cows are for milking, not slaughtering). So they invent a new product, that no self respecting OEM would sell on a decent PC, slap a $y price tag on it, and say to the netbook buyers, 'there you go, a version of windows for $y', while they keep selling the main version for $x. The fact that that version sucks is painful for MSFT, but not as painful as selling all Windows for $y for all PCs, nor as painful as being seen to do nothing in the netbook market. Summary: this isnt about MSFT being dumb, its about MSFT keeping their cash-cow alive so that the share-holders don't slaughter them today, even if it may be bad for long-term (~5 years) shareholder value. (x >> y)

calambrac 18y ago
Why would shareholders suddenly jump ship if MS came up with a price for Windows that kept them on netbooks? Wouldn't shareholders be more scared of the prospect of seeing netbooks switch away from Windows en masse? And why would setting OEM netbook pricing to a specific value imply a loss on non-netbook pcs? It's not like they'd be dumb enough to set price $y without a contract forbidding the manufacturer from dropping it on anything other than a netbook.
- twopoint718 18y ago
  Don't let me put words in other mouths, but the reason tomsaffell is saying that if MS sells a $y-priced version of Windows for netbooks that they'll end up losing $(x-y)(# of non-netbook PCs) is this: if there is a fully-functional* Windows version on the market then all contemporary Windows versions will tend to that price. Users will say "why do I pay $x for Windows when John Q. Otherguy got it for $y on his netbook?". The only way that users won't say that is if the "Windows for Netbooks" is lousy in some way or another. *(Means something like "works the same, except for feature Z" where Z is sufficiently obscure)
  - aneesh 18y ago
    Most users have no idea how much of their PC purchase went towards a Windows license.
  - calambrac 18y ago
    Users don't know how much OEMs pay for the copy of Windows that's on their machines. MS just simply wouldn't sell it to end users at that price, just like they don't sell regular Windows to end users at OEM prices now.
    - Mazy 18y ago
      The problem is that if there is this cheaper version for netbooks that's good enough, OEMs will just buy that and put it on all their boxes.
      - calambrac 18y ago
        And then they would be sued. That's what contracts are for.
- tomsaffell 18y ago
  > It's not like they'd be dumb enough to set price $y without a contract forbidding the manufacturer from dropping it on anything other than a netbook. I'm no lawyer, so I'd love to have a lawyer wade in on this. But seeing as you asked, I'll take a stab: such a contract could be perceived as being anti-competitive, and MSFT are super sensitive to being perceived to be anti-competitive. A product that is demonstrably less good can be sold for less. But to sell the identical product at two different price points to the same company, that sounds to me (as a consumer) unfair, and anti-competition law is intended ultimately to protect consumers. (aside: MSFT had a nice solution before Win7: keep selling XP under certain netbook restrictions because it is a different product to vista, and a product that is better for netbooks/ULCPCs (and a liked product). I'm guessing they wont have as much luck selling Vista on special netbook /ULCPC only terms once Win 7 is out.. )
  - calambrac 18y ago
    Um, they already have variable pricing for XP on netbooks. http://www.winmatrix.com/forums/index.php?showtopic=23795 http://www.winmatrix.com/forums/index.php?showtopic=23795 http://www.crn.com/software/212902058 http://www.crn.com/software/212902058 (not the best sources, but they were the first hits. wsj reported it, too)
  - netsp 18y ago
    Tiered pricing is not seen as bad as it once was. Bill Gates is currently promoting it as an international development tool. I'm not sure what the laws are (or will be), but I think there could be work-arounds.
- netsp 18y ago
  I guess that the answer to your first question relates to how much faith shareholders have in those contracts as a way to keep the average cost of Windows high. Milking a cash cow is not a win-lose, binary process. It is a matter of how much & how long. Tiered pricing would make me edgy. The answer to your second question is lack of competitive pressure. Windows isn't ideal for netbooks. When they came out first, Linux looked like it might win. But it didn't. They kept netbooks windows. They did this without a fight, without a netbook strategy. At this point, there are no new competitors & no problematic trend. They now have a netbook strategy. Flawed or not, this is better then no strategy. Why should shareholders be worried.

calambrac 18y ago

Why would shareholders suddenly jump ship if MS came up with a price for Windows that kept them on netbooks? Wouldn't shareholders be more scared of the prospect of seeing netbooks switch away from Windows en masse? And why would setting OEM netbook pricing to a specific value imply a loss on non-netbook pcs? It's not like they'd be dumb enough to set price $y without a contract forbidding the manufacturer from dropping it on anything other than a netbook.

twopoint718 18y ago
Don't let me put words in other mouths, but the reason tomsaffell is saying that if MS sells a $y-priced version of Windows for netbooks that they'll end up losing $(x-y)(# of non-netbook PCs) is this: if there is a fully-functional* Windows version on the market then all contemporary Windows versions will tend to that price. Users will say "why do I pay $x for Windows when John Q. Otherguy got it for $y on his netbook?". The only way that users won't say that is if the "Windows for Netbooks" is lousy in some way or another. *(Means something like "works the same, except for feature Z" where Z is sufficiently obscure)
- aneesh 18y ago
  Most users have no idea how much of their PC purchase went towards a Windows license.
- calambrac 18y ago
  Users don't know how much OEMs pay for the copy of Windows that's on their machines. MS just simply wouldn't sell it to end users at that price, just like they don't sell regular Windows to end users at OEM prices now.
  - Mazy 18y ago
    The problem is that if there is this cheaper version for netbooks that's good enough, OEMs will just buy that and put it on all their boxes.
    - calambrac 18y ago
      And then they would be sued. That's what contracts are for.
tomsaffell 18y ago
> It's not like they'd be dumb enough to set price $y without a contract forbidding the manufacturer from dropping it on anything other than a netbook. I'm no lawyer, so I'd love to have a lawyer wade in on this. But seeing as you asked, I'll take a stab: such a contract could be perceived as being anti-competitive, and MSFT are super sensitive to being perceived to be anti-competitive. A product that is demonstrably less good can be sold for less. But to sell the identical product at two different price points to the same company, that sounds to me (as a consumer) unfair, and anti-competition law is intended ultimately to protect consumers. (aside: MSFT had a nice solution before Win7: keep selling XP under certain netbook restrictions because it is a different product to vista, and a product that is better for netbooks/ULCPCs (and a liked product). I'm guessing they wont have as much luck selling Vista on special netbook /ULCPC only terms once Win 7 is out.. )
- calambrac 18y ago
  Um, they already have variable pricing for XP on netbooks. http://www.winmatrix.com/forums/index.php?showtopic=23795 http://www.winmatrix.com/forums/index.php?showtopic=23795 http://www.crn.com/software/212902058 http://www.crn.com/software/212902058 (not the best sources, but they were the first hits. wsj reported it, too)
- netsp 18y ago
  Tiered pricing is not seen as bad as it once was. Bill Gates is currently promoting it as an international development tool. I'm not sure what the laws are (or will be), but I think there could be work-arounds.
netsp 18y ago
I guess that the answer to your first question relates to how much faith shareholders have in those contracts as a way to keep the average cost of Windows high. Milking a cash cow is not a win-lose, binary process. It is a matter of how much & how long. Tiered pricing would make me edgy. The answer to your second question is lack of competitive pressure. Windows isn't ideal for netbooks. When they came out first, Linux looked like it might win. But it didn't. They kept netbooks windows. They did this without a fight, without a netbook strategy. At this point, there are no new competitors & no problematic trend. They now have a netbook strategy. Flawed or not, this is better then no strategy. Why should shareholders be worried.