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Microsoft vies for budget laptop market with XP price cuts (ars technica)

Microsoft is offering reduced prices on Windows XP to combat the threat of Linux on low-cost ultra-mobile PCs, according to this ars technica article. "According to IDG, which obtained details about the price cuts from hardware vendors, Microsoft will offer Windows XP licenses for $26 for developing countries and $32 for the rest of the world. In order to qualify for these deep discounts, products will have to be limited to a maximum of 1GB of RAM, 10.2 inch screens, and single-core processors clocked no higher than 1GHz (though there are apparently some exceptions). Products must also not have hard drives exceeding 80 GB in capacity and cannot have touch-screen technology."
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Microsoft vies for budget laptop market with XP price cuts (ars technica)

Posted May 12, 2008 17:24 UTC (Mon) by sbergman27 (subscriber, #10767) [Link]

Basically, what good product design giveth, Microsoft taketh away.  If your engineers are able
to provide impressive specs at an impressively low price... MS will ruin it by upping the
price of the OS, effectively punishing the manufacturer and their customers for any good job
done by the design team.  Yes, I can certainly see why the name "Microsoft" is so closely
associated with the word "innovation".

Microsoft vies for budget laptop market with XP price cuts (ars technica)

Posted May 12, 2008 17:38 UTC (Mon) by shadesfox (subscriber, #28651) [Link]

The whole time Microsoft's goals have been clear.  They want prices to remain the same, but
the 
hardware is free while the software is the entire cost of the system.


Microsoft vies for budget laptop market with XP price cuts (ars technica)

Posted May 12, 2008 22:08 UTC (Mon) by sbergman27 (subscriber, #10767) [Link]

They want the consumer to perceive that Windows is free and "comes with" the hardware.  That
illusion is starting to cost them something. 

So useless

Posted May 12, 2008 18:37 UTC (Mon) by felixfix (subscriber, #242) [Link]

Microsoft prospered originally because IBM had to protect their legacy systems by crippling
the new stuff.  DEC did the same.  Car manufacturers do it. Everyone does it, and Microsoft is
no exception.  This move just happens to be more desperate, more obvious, and will be more
immediately counterproductive than their previous legacy protection moves.  Microsoft will
become synonymous with "old", "clunky", and "obsolete", and competitors will quickly learn
from the market to avoid Microsoft systems.

This will drive innovation in Linux handhelds much faster than if Microsoft played it smart.
Go, Microsoft, Go!

Microsoft vies for budget laptop market with XP price cuts (ars technica)

Posted May 12, 2008 18:40 UTC (Mon) by cpm (subscriber, #3554) [Link]

keep cutting those prices baby!

Yeah!

love it.

Microsoft vies for budget laptop market with XP price cuts (ars technica)

Posted May 12, 2008 19:33 UTC (Mon) by stijn (subscriber, #570) [Link]

It continues to amaze me that so many sellers of propietary and/or closed source software are erecting completely artificial barriers. Student versions, versions that are limited to one core, demo programs with expiration dates, and the list of crippleware goes a lot further even without help from the Pandora's box that is the EULA. From both the mathematical and the ethical point of view this is completely absurd. I think that from the economic point of view it only makes sense by taking into account things like market inertia, monopolist practices, and seeking legislative support for entirely novel theories of property. To finish an incoherent rant, the "cry piracy" approach surely must start to backfire even worse than it already does.

Microsoft vies for budget laptop market with XP price cuts (ars technica)

Posted May 12, 2008 21:00 UTC (Mon) by chromatic (subscriber, #26207) [Link]

It continues to amaze me that so many sellers of propietary and/or closed source software are erecting completely artificial barriers.

Almost everything about proprietary software is an artificial barrier; duplication costs are almost irrelevant.

Microsoft vies for budget laptop market with XP price cuts (ars technica)

Posted May 12, 2008 22:25 UTC (Mon) by stijn (subscriber, #570) [Link]

True. Still, crippleware brings to mind the phrase adding insult to injury.

Microsoft vies for budget laptop market with XP price cuts (ars technica)

Posted May 12, 2008 22:56 UTC (Mon) by zotz (guest, #26117) [Link]

"True. Still, crippleware brings to mind the phrase adding insult to injury."

Yep except I think they might be multiplying by instead of adding to. ~;-)

all the best,

drew

Microsoft vies for budget laptop market with XP price cuts (ars technica)

Posted May 13, 2008 20:18 UTC (Tue) by jmansion (guest, #36515) [Link]

So?  The cost of providing the implied support that is provided with it is non-zero.
 
Nor is (r&d
cost)*(1/probability-of-success)*(1/number-of-units)*(inflation-factor)*(reward-for-risk-factor).
 
ie the required capital return for an investor to bankroll the development.
 
Its very difficult to make a business case for an investment in free software development that
isn't essentially monetising something already done by wrapping it up in fancy pants.

(If you know how to, please do let on!)
 
Try it, and bear in mind that providing services has a high cost of sales, a high service
provider cost, a delay in revenue (so there is a time decay in the effective value), and a
problem with competition from low-cost outfits who didn't foot any r&d bill.
 
Lets NOT sneer at pay-for-ware, until we actually have a coherent answer that doesn't see
software developed as a hobby, as a side effect of hardware sales, or as a P&R exercise by
insurance salesmen (sorry, 'enterprise support providers').

Microsoft vies for budget laptop market with XP price cuts (ars technica)

Posted May 12, 2008 23:29 UTC (Mon) by wilreichert (subscriber, #17680) [Link]

I disagree with nothing you've said, but try explaining all that to your grandmother.

Microsoft vies for budget laptop market with XP price cuts (ars technica)

Posted May 12, 2008 23:42 UTC (Mon) by dmaxwell (guest, #14010) [Link]

Well, there's the ever reliable car analogies.

Grandmother may remember GM buying up all the streetcar lines just so they could shut them
down.  She may even remember the sad case of one Preston Tucker.  Go from there.

Microsoft vies for budget laptop market with XP price cuts (ars technica)

Posted May 13, 2008 2:10 UTC (Tue) by rogblake (guest, #18258) [Link]

Bad examples. The "GM streetcar conspiracy" is a myth. For example, see:

  http://1134.org/stan/ul/GM-et-al.html

Likewise in the case of Preston Tucker it is not at all clear that the "Big Three" were behind
the SEC investigation that killed the company. (Though of course that conspiracy theory is
what was portrayed in the 1989 film, "Tucker: The Man and His Dream.")

Microsoft vies for budget laptop market with XP price cuts (ars technica)

Posted May 13, 2008 20:17 UTC (Tue) by martinfick (subscriber, #4455) [Link]

Perhaps a more encompassing link that includes several sides of the story would be useful:

http://en.wikipedia.org/wiki/Great_American_Streetcar_Sca...


Microsoft vies for budget laptop market with XP price cuts (ars technica)

Posted May 13, 2008 6:14 UTC (Tue) by bojan (subscriber, #14302) [Link]

It's all about market segmentation, apparently:

http://www.joelonsoftware.com/articles/CamelsandRubberDuc...

This is good for the longterm

Posted May 13, 2008 2:22 UTC (Tue) by jmorris42 (subscriber, #2203) [Link]

This move is a good thing.  It means many things.  First I'd say we are officially in the
'then they fight you' phase in yet another market segment, low spec laptops.

I suspect OEMs are split on this, many were terrified of what was shaping up as a race to the
bottom and hope Microsoft has saved them from the pressures of the marketplace.  On the other
hand some won't like the heavy handedness of this move, the obviously artifical line between
cheep machines that qualify and others that don't, etc.  And besides, OEMs like Asus don't
have a choice but to play ball with Microsoft because while the EEE PC is selling well with or
without Windows, annoying Microsoft would risk their higher dollar product lines.

Watch customers for the interesting reaction.  What do you think Fortune 500 corps are going
to think when a) they are told XP is dead, kaput, unavailable, etc. yet Microsoft is selling
the very product many of them WANT at prices lower than the sweatheart deals they can get when
buying by the 10K units and sometimes after waving the Penguin flag themselves in attempts to
get better prices.

Longterm this move won't stop the bleeding.  Moore's Law is going to drive prices down because
for a large segment of the market a 1Ghz class machine is enough so faster isn't really
valuable to those customers.

I'll just repeat a prediction I have made before.  Eventually the prices on hardware will drop
low enough that one of two things happen.

1.  Microsoft lowers license pricing far enough it guts their profitability in order to
maintain an OS monopoly that won't be able to keep enough cash rolling in to make shareholders
happy.

Remember that Windows and Office generate almost all profits, which is how they can lose money
on things like their Internet and game divisions.  Office will be under increasing pressure
from OO.o as the years roll on so jacking it's price to compensate isn't an option.

Keeping XP around is only a stopgap.  When they are selling the same OS at vastly different
prices those paying the premium prices will start to balk.

2.  Microsoft conceeds the bottom to Linux.  Of course this will be fatal because what is low
end today will be average tomorrow.  The computing world is littered with the husks of
companies who made this mistake.  Don't expect Microsoft to be this dumb.

But even worse will be when a Chineese consumer electronics maker gets the bright idea to
churn out a cheep generic linux desktop or laptop and sell it in places that don't have a
horse in the PC game and thus won't care if it canabilizes sales of higher price/margin
machines.  Not being in the PC business they won't have other product lines to worry about
retaliation on.  Game over.

This is good for the longterm

Posted May 13, 2008 3:32 UTC (Tue) by mtall (guest, #52045) [Link]

I'm not sure if I buy your reasoning. Machines like the EEE pc are not aimed at people who buy traditional laptops. Instead they represent a new market segment that is largely orthogonal to normal laptops -- in other words, more sales in this segment is not likely to cannibalize sales of normal laptops. This new market segment is growing, meaning Microsoft isn't undercutting itself, but instead getting an ever bigger slice of the overall PC market.

This is good for the longterm

Posted May 13, 2008 8:54 UTC (Tue) by farnz (subscriber, #17727) [Link]

Two things I think you're missing:

  1. Market-leading products have a tendency to be destroyed by something that creates a new, lower-end market, then climbs up. IBM ignored the PC market, assuming it wouldn't damage mainframe sales, as it is a market that's largely orthogonal to mainframes. They hit pain when it became clear that powerful PCs (while not as reliable as mainframes) were Good Enough for most users. Microsoft can't ignore UMPCs, or treat them as a new market segment, as it's all too plausible that they'll become Good Enough for most users; imagine (for the sake of argument) an eeePC with 20GB flash, 1GB RAM, a processor equivalent to today's 1.6GHz Core 2 Duo, and a HDMI port for connecting to your HDTV. Suddenly, if the software on the eeePC is good enough for you, an eeePC is enough; when you need a big screen, you just plug into the TV.
  2. Microsoft have existing customers, who are being told that XP will not be available for love nor money in the near future; they don't yet want to migrate to Vista, and now they're being told, "you're not important enough to sell XP to; other people can have it for less than you've ever paid, but you've got to move to Vista whether you like it or not". This is not good for relations with existing customers, and gives them new incentive to look at (e.g.) Ubuntu desktops, using WINE to run their business-specific applications.

So, in the short term, no change - but, in the long term, Microsoft are facing two competitive pressures, one from cheap hardware with free or nearly free software, one from existing customers getting grumpy at not being treated well.

This is good for the longterm

Posted May 13, 2008 12:25 UTC (Tue) by i3839 (subscriber, #31386) [Link]

I've the impression that mainframes never did better than nowadays. Perhaps you're confused
with minicomputers that were wiped away by micros? (Though it happened all before my time.)

And people, don't forget that MS is a software company that has a lot of small to medium
business customers in its grasp with (semi-)custom software.

BY 1990 mainfarmes were dying

Posted May 13, 2008 14:39 UTC (Tue) by khim (subscriber, #9252) [Link]

I've the impression that mainframes never did better than nowadays.

Is this a joke? In 1960-1970 mainframes were THE business computers. All big companies used them. By 1990 they were almost wiped out: only IBM survived and even IBM's mainframes had bleak future. Linux quite literally saved them - but that's totally different story.

Mainframes still selling well

Posted May 13, 2008 16:37 UTC (Tue) by pr1268 (subscriber, #24648) [Link]

No joke. IBM's mainframes continue to sell well. Consider that mainframes have been used for virtualization for forty years, and companies nowadays often use a mainframe to run hundreds of virtual hosts.

IBM did attempt to slowly withdraw from the mainframe market, but then a lot of companies using them for traditional purposes (i.e., non-virtualized hosts) started clamoring for upgrades and new models. Apparently these businesses have a "it ain't broke, so no need to fix it" attitude towards their IT needs.

BY 1990 mainfarmes were dying

Posted May 13, 2008 18:44 UTC (Tue) by larryr (guest, #4030) [Link]

Maybe mainframes nowadays have a 1% share of a market that is 100x as big as the market 40 years ago of which they had 50%, and in that sense, mainframes never did better than nowadays.

This is good for the longterm

Posted May 15, 2008 9:24 UTC (Thu) by rwmj (subscriber, #5474) [Link]

OEMs like Asus don't have a choice but to play ball with Microsoft because while the EEE PC is selling well with or without Windows, annoying Microsoft would risk their higher dollar product lines.

I thought ASUS mainly sold motherboards and other components, but maybe I'm wrong there. My main point is that UMPC laptops will be tempting as a higher margin product for companies which mainly sold very low margin, high volume components before. So look for motherboard and LCD manufacturers, and Chinese assembly houses (Flextech etc.) starting to build these. They don't care a jot what Microsoft think.

Rich.

Microsoft vies for budget laptop market with XP price cuts (ars technica)

Posted May 15, 2008 12:27 UTC (Thu) by NRArnot (subscriber, #3033) [Link]

So does this mean that someone who buys a Windows EEEpc with XP and connects it via the VGA
port to his 1600x1200 desktop monitor will be prevented by crippled XP from running at
1600x1200? Or that if he upgrades his RAM, XP will stop working and demand another $40 (or
whatever)?

Yes, a really really good way to persuade the masses that MS is a greedy convicted monopolist
pig!

Now, who is going to ship the better-than-Eee product with the 11 inch high-res screen and 2Gb
RAM on-board and the low linux price tag, that will have to cost 20% more if you want Windows
with it?

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