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As hardware junkies, we have little trouble justifying our desire for netbooks. Microsoft on the other hand, is having a huge problem trying to figure out how to cash in on the craze. According to new research conducted by Bloomberg, Microsoft’s historic stock plunge of over 40 percent this year alone can be tied in part to the success of netbooks. These sub $500 PC’s are by far the fastest growing segment in the computing industry. And unfortunately for Microsoft, many of these devices don’t ship with Windows.
Internally, Microsoft estimates that around 70 percent of netbooks run at least some version of Windows. This is a far cry from the over 90 percent market penetration they enjoy in the notebook and desktop segments. Additionally, since the vast majority of netbooks run older versions of Windows, margins are much thinner. The OEM licensing fee of $40/$50 for Windows XP is a drop in the bucket when you compare it to the $100 or more they expect for Vista. Bridging the revenue gap isn’t as easy as raising the price for XP either. Especially when you consider that it only costs around $5 to deploy a version of Linux. The Microsoft tax is widely debated by netbook manufacturers who are scrambling to keep sticker prices low. As a result, Microsoft has cut projections for Windows growth in Q4 to as little as 2 percent. Earlier in the year they were estimating growth of around 9 to 10 percent.
While Microsoft might suffer in the short term, it appears the long term strategy is to address netbooks with the upcoming release of Windows 7. During PDC last week, Steven Sinofsky showed off a $399 netbook running the new OS. And according to Senior Vice President Jon DeVaan, “People will be pleasantly surprised and excited by how Windows 7 runs on low-cost machines”. The over arching question here is if Linux will gain any long term momentum as a result of its new found market penetration. I guess only time will tell.
So would you rather a faster netbook running Linux, or a slightly slower machine with Windows?
Links:
[1] http://www.maximumpc.com/user/justinkerr_0
[2] http://www.bloomberg.com/apps/news?pid=20601103&sid=a3VyE_ofSwwE&refer=news
[3] http://www.maximumpc.com/article/news/worldwide_pc_market_growing_strength_netbooks
[4] http://arstechnica.com/journals/microsoft.ars/2008/10/28/arspdc-steven-sinofsky-on-windows-7-and-netbooks
[5] http://www.maximumpc.com/article/news/are_tiny_netbook_pcs_a_threat_big_manufacturers
[6] http://www.maximumpc.com/article/news/dell_unveils_inspiron_mini_12_netbook
[7] http://www.maximumpc.com/article/news/rumor_toshiba_and_samsung_enter_crowded_netbook_market
[8] http://www.maximumpc.com/tags/consumer_electronics
[9] http://www.maximumpc.com/tags/hardware
[10] http://www.maximumpc.com/tags/linux
[11] http://www.maximumpc.com/tags/mobile
[12] http://www.maximumpc.com/tags/netbook
[13] http://www.maximumpc.com/tags/ultraportable_0
[14] http://www.maximumpc.com/tags/windows
[15] http://www.maximumpc.com/articles/news
[16] http://www.maximumpc.com/user/login?&commentfragment=comments_top_anchor