Windows Vista Blue Light Special
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New Analysis. Microsoft built its business on a simple principle: Offer more features for less money than competitors. But what happens when the competitor is Microsoft? Price cut. |
[Editor's Note: This is the first of several posts started last week, but delayed because of reporting on Vistagate.]
Windows Vista has had a heck of a time competing against Windows XP. The older operating system benefits from a large supporting ecosystem and smaller hardware requirements. Vista isn't that much better, and for users with incompatible hardware or software it's a step backward.
After years of stable, monopolistic pricing, Microsoft finally bumped against some real operating system competition: Windows. If this were Spy vs. Spy, Vista would be in trouble. Heck, it is.
So, Microsoft is cutting prices to gain some Vista leverage against entrenched competitor Windows XP. As my eWEEK colleague Peter Galli reported on Friday, the price cuts will come with the release of Windows Vista Service Pack 1.
Except Microsoft isn't really cutting prices. With Vista, Microsoft raised Windows pricing by offering:
- Basic for about the same price as XP Home but with less features and functionality
- The real XP Home/Media Center replacement, Vista Home Premium, for higher retail cost—$40 more just for the upgrade
- New SKU, Vista Ultimate (full version), for the same price as Xbox 360
The price increases would be tougher in a competitive market. Well, they were tougher—and perhaps unexpectedly for Microsoft executives—because of Windows XP competition. The cuts are more a normalization, a partial return to XP-like price levels.
Still, Microsoft hasn't given up all that much because the price reductions are for Vista retail copies. OEM pricing is unchanged. Retail sales typically drop to a trickle about six months after a new Windows version releases.
Something odd, which hugely undermines the price cuts' value, today: Retail upgraders are probably more likely to run up against Vista's hefty system requirements, particularly in emerging markets. Many people looking to take advantage of the price cuts will find that their PCs aren't capable of running Windows Vista.
For example, based on Microsoft figures released in internal e-mails last week: Only 46 percent of the notebooks shipped during fourth-quarter 2006—the sales period ending a month before Vista's widespread availability—are capable of running Aero. Less than half.
But there is more going on than just XP competition. Microsoft has embarked on a new strategy of staggered pricing, based on market. No longer will Microsoft set one price for Windows everywhere.
The first measurable staggered pricing change occurred in August, when Microsoft slashed the cost of Windows XP in China. Microsoft had already offered lower-cost options, but no measurable retail price cuts in any major emerging market.
What's different now is Vista. Microsoft isn't just cutting retail purchase price; it's doing so in a somewhat non-uniform way. Discounts aren't the same for every market. Microsoft executives first discussed this "Big Mac Index" strategy in February 2004. The idea is that a Big Mac doesn't cost the same everywhere. Four years later (how's that for slow moving), Microsoft finally is moving away from fairly uniform pricing across all markets.
Uh-oh, there is a problem, Redmond. Many of the computers in use today in emerging markets aren't fully capable of running Windows Vista.
Comments (24)
Discounting Vista won't work. Microsoft should just discontinue Vista and extend XP until Windows 7.
Posted by Ralph | March 3, 2008 1:49 AM
Ralph,
Why would they ever do this? Sure XP is good.. but it came out in 2001. Time to upgrade.. (oh wait im already running home basic and I need ultimate-lame!)
Posted by Steve | March 3, 2008 2:00 AM
Look closer higher Linux usage lower price tag.
Posted by oiaohm | March 3, 2008 5:48 AM
Look closer higher Linux usage lower windows price.
Simple little fact going on here.
Posted by oiaohm | March 3, 2008 5:49 AM
The secret is out: Microsoft's profit surge came on he back of increased prices. What will they do for next year? As your post shows; even a monopoly can only raise prices so far.
Posted by Phil | March 3, 2008 8:41 AM
I do not believe the current share of GNU/Linux seats enters M$'s calculations at all. It is all about sales of M$'s products. They need to cut prices and/or kill XP to sell Vista. Many will balk and migrate to GNU/Linux if they kill XP. If they do not kill XP many large business customers will never go to Vista.
Expect no growth or even a retreat on M$'s market share. There is no upside for them. That is why they are trying to buy Yahoo!. They need another line of business to bring in big bucks before the OS/Office dies which should be in a year or two at this rate.
Posted by Robert Pogson | March 3, 2008 8:59 AM
A start, but still too much:
http://www.microsoft-watch.com/content/vista/what_would_you_pay_for_vista.html
Posted by Karl | March 3, 2008 10:54 AM
Look, if you have a computer with Windows XP on it, you shouldn't even be downgrading to Vista anyway. What is wrong with Microsoft? Vista is going to come pre-installed on an overwhelming majority of new PC's; why the heck do they need PC's with older hardware to switch the OS to Vista? And if the switch to Vista is a bad experience for the user, the more likely that user will consider a Mac for their new PC.
And note as Joe has stated, these are for retail copies, not OEM's. So this is an attempt to get home users to downgrade to Vista. O.K., so now it will cost me less to slow down and screw up my PC? Sounds like a deal to me.
Posted by Tom Berber | March 3, 2008 11:52 AM
Quote;
Robert Pogson :
"I do not believe the current share of GNU/Linux seats enters M$'s calculations at all. It is all about sales of M$'s products. They need to cut prices and/or kill XP to sell Vista. Many will balk and migrate to GNU/Linux if they kill XP. If they do not kill XP many large business customers will never go to Vista."
--------------------------------------------------Robert, I think you are basically correct here. With one very possible exception, even if MS kills XP, businesses will not embrace Vista. They will wait for Seven to come out, or move to Linux/BSD/Mac.
Most businesses that can think, should be employing some linux machines at this point, the cost savings to get off the windows upgrade treadmill is high. If not, they need to start.
Posted by chips | March 3, 2008 12:17 PM
This Vista bashing makes me laugh...I have it on all three PC's in my home and I've not had one problem at all. Networks just fine and runs very fast!
Posted by Brian | March 3, 2008 1:45 PM
Sure, I run Vista on all my computers, without any problems at all. Not one virus. Next year I even intend to hook it up to the internet. All my programs work. And its so fast on my old 386 as well, with only 32mb of memory.
But then, maybe this was not a good day to give up drinking, or start telling the truth. Or maybe I work for MS, and was paid to say all that?
Posted by Voice of reason | March 3, 2008 2:52 PM
Voice of reason said
Sure, I run Vista on all my computers, without any problems at all. Not one virus. Next year I even intend to hook it up to the internet. All my programs work. And its so fast on my old 386 as well, with only 32mb of memory.
But then, maybe this was not a good day to give up drinking, or start telling the truth. Or maybe I work for MS, and was paid to say all that?
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One only needs to go into the computer refurb and computer repair shops and ask IT professionals about whats really going on. There is a thriving business replacing Vista with XP. Gee I wonder why?
Why are some governments, government agencies and some Corporate companies moving to open source? Wasn't Vista the greatest thing since sliced bread? Guess Vista didn't WOW them enough?
Yea..Vista SP1 is a real sucess too. Um whats that little "issue" with those Vista capable stickers?
lol No I am not paid by MS (or get freebies by them) to post "favorable" propaganda either.
I did get a free Vista Business operating system disc when I bought a computer for my wife. It had downgrade rights to XP Pro, funny thing it came with XP pro already loaded...and that Vista Business disc is just going to sit and rot in its case.
Posted by Ralph | March 3, 2008 5:04 PM
Thing is, $129-$319 is still not competitive with doorstops that you could at a home improvement store for $2-3.
Microsoft is a company whose executive management team is in major denial right now about badly the market is reacting to their flagship product. One has to wonder if a change in leadership at the company is necessary.
Here are a couple of ideas for MS to consider.
1. Bring back Windows XP as a flagship operating system.
2. Silverlight 2 could be an interesting client strategy, especially if they made it interop with Winforms as the new API matured. This would be a tough pill for the company to swallow, since it's an acknowledgement that next generation application APIs have to be cross platform, and that WPF doesn't have much traction.
Posted by Jason | March 3, 2008 6:15 PM
Microsoft has always had staggered pricing - just in the opposite direction that you suggest - UP.
For example, in New Zealand - Windows Vista Ultimate (full price) - $979 before the new discount. With current exchange rates, that is about US$750 - 800.
Some price parity.
Posted by nerd6 | March 3, 2008 8:50 PM
Too much $$$ and not enough features to justify.
Posted by JM | March 3, 2008 9:26 PM
OK. Who out there has purchased a retail copy of Vista Home Premium, Vista Ultimate or Vista Business? If so, why? It would have to be as an upgrade to your Windows XP system, correct? Anyone with an OS older than XP on their system could not even run Vista anyway, so it's a given. That means you did an upgrade, even if as a clean install.
OK. How is Vista better than XP? Does it do something for you that XP did not?
I put Vista on the PC I built a year ago. Oh, it works fine. I just can't find anything it does or does better than XP. And when I temporarily installed XP on my machine as a test, it was like a shot of adrenaline. My PC ran everything instantaneously.
Here is another question. What is the full retail version of Vista for? IF you are building a system, you buy an OEM. If you have a late model PC with XP, you would get Vista upgrade. So who would be buying a full retail copy of Vista? The only plausible answer would be someone who bought a new computer with Linux on it and didn't like it. So would this person buy the Vista OS for about what they paid for their PC? Doesn't make sense.
Posted by Tom Berber | March 4, 2008 12:22 PM
@Tom Berber:
I believe that I am correct on this -- at least this is how it works with XP. There is one reason to buy retail instead of OEM. In theory, if I build a PC and put an OEM install on it, I cannot later do a motherboard upgrade. The OEM license assumes a system builder selling a configuration to an end user. The license is locked to the original cofiguration. The retail license presumes a hobbyist and allows greater latitude for upgrades.
Posted by Karl | March 4, 2008 12:45 PM
Vista prices fall even further
http://www.news.com/8301-13860_3-9883961-56.html?tag=nefd.pulse
Quote: "The question now is just how low will Vista go."
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Even if Vi$ta were free, it would be too much for me to ever think about using it.
Posted by chips | March 5, 2008 1:19 AM
@Karl
If I buy a Dell that has Vista OEM on it and my motherboard fails, I get a new motherboard. If Vista does not deactivates, I call Microsoft for a phone activation. A little hassle? Maybe, but not a deal-breaker.
The difference with the OEM Karl, is that I cannot take Vista off the original PC it went on and install it on a different system.
So that still leads to the question, who is going to buy full retail Vista? Answer: Not a lot. Since the OEM is no more than half the price of the retail, you would have to know that you plan on installing Vista on one machine, take it off, put it on another machine, take it off and put it on a third machine before you would see a cost benefit in buying the full retail Vista.
Posted by Tom Berber | March 6, 2008 1:14 PM
@Tom Berber:
Excellent! Your "half price" argument is compelling. Thanks!
Posted by Karl | March 6, 2008 1:58 PM
More than the OEM being "half price", I look it at as Vista retail is "twice the price". I say that because an overwhelming majority of PC owners will get an OEM copy, mostly because they bought a PC from a vendor. Some of us will build our own and use an OEM copy. So to me, the OEM price is the standard.
If you already have a PC with Windows XP installed, definitely do not buy any copy of Vista. Now you are saving 100% and you have a superior operating system. Maybe do a fresh clean install, right after you can get XP SP3. Your machine will feel like new.
Some advice if you do not have an XP disc. Try and find a friend who has a copy of the exact same version of XP you have. If your license sticker says "Windows XP SP1 Home Edition" you must use the same exact flavor. A disc with "Windows XP Home Edition" or "Windows XP SP2 Home Edition" And you definitely cannot mix and match with XP Professional or XP Media Center Edition.
If it is the same exact version, you can use your license and CD Key number to install. When it is time to activate, it should activate over the internet. If not, call Microsoft, they will activate your XP over the phone as long as you installed the exact same version that came installed on your PC.
One last XP thought; you might want to make a copy of that disc to keep with your PC as a backup.
I do have to admit ONE advance in Vista. One disc for all: Business, Ultimate, Home Premium, Home Hobbled, even Starter Edition. So if my wife has Home Premium, and I have Ultimate, it doesn't matter which disc I grab, it all depends on my license, which is good. I just don't know if you can mix-and-match OEM with Retail discs and if you will be able to once SP1 discs are out.
Posted by Tom Berber | March 11, 2008 7:22 AM
IF they kill windows XP, the amount of piracy will grow even more.
Posted by M.daams | March 18, 2008 4:39 AM
how much is price vista (os)AED price
Posted by mohammed | March 21, 2008 1:12 PM
Current housing demand continues to outpace last year and the reemergence of first time home buyers is a major factor. If you listen to or read all the recent reports regarding" sold" statistics for March, one would quickly come to the conclusion that the real estate market is continuing to sputter along at a slow pace. However, this could not be further from the truth. Sold activity is a snapshot of the past, about a month and a half in the past to be precise. So, March" sold" statistics are really a snapshot of the second half of January through the first half of February. The market did improve during that time but was still extremely anemic as demand, a snapshot of the prior 30 days of escrow activity, grew from 989 escrows in mid- January to 1,630 escrows in mid- February, a gain of 641 escrows. Since then demand has continuously grown to its current height of 2,374 escrows. Last year at this time demand was at 1,925 escrows, 449 fewer than today. This recent escrow activity will translate to sold data reported in the months to come. The big story will be that the year over year sold statistics will be better for the first time since the Autumn of 2005. Demand already crossed that threshold two weeks ago. Some skeptics attempt to discount the uptick in demand, claiming that many will fall out of escrow. That is simply not statistically true. The data does not support their claim. Yes, some escrows do fall out; however, the snapshot of 30 day escrow activity misses some escrows that have already closed because they were less than 30 day escrows. The average escrow is about 45 days, but we do have one, two and three week escrows that won' t show up in the data for long. So, the less than 30 day escrows offset most escrows that fall out. The bottom line: the market is improving. Market time has dropped from 15. 6 months at the beginning of the year to 6. 55 months today, not as deep of a buyer' s market. The active inventory grew by only 82 homes in the past two weeks to 15,556 homes. The active inventory has not changed much this year and has actually dropped by 61 homes over the past month. Last year at this time the active inventory was only 745 homes fewer homes than today and it was growing at a rate of 700 homes every two weeks.
Posted by lease option buy | August 4, 2008 11:43 PM