Microsoft's Fiery Solution to the Netbook 'Problem'
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Like Dr. Frankenstein creating his monster in the tower, PC manufacturers probably thought that mini-notebooks - those cheap and portable laptops that everyone calls "netbooks" - would be a good thing. Even as overall PC sales hit rock bottom and started to dig, netbook purchases seemed to tick ever-upwards, fueled by an apparently limitless audience of people whose computing needs extend to checking their e-mail and watching the family cat finally immolate that pesky dog on YouTube. For Microsoft, though, netbooks are more like Frankenstein's monster after it breaks free and starts wandering through the local village: annoying at best, borderline-dangerous at worst and refusing to leave even when poked by a sharp stick. Microsoft claims that Windows runs on 96 percent of netbooks, a number (as I'm constantly reminded by loyal readers) that does not take into account those users who purchase a Windows-equipped device and then wipe it clean in favor of a Linux or open-source operating system. That aside, Microsoft's problem is that netbooks thus far have run Windows XP; and if users choose to stay with that operating system instead of upgrading to a stripped-down version of the upcoming Windows 7, then Microsoft could be looking at some softness in revenue. Even if the consumer trend in netbook purchasing continues for the foreseeable future, the stripped-down version of Windows 7 will still offer lower margins than if a consumer purchased a sizable desktop loaded with, for example, Windows 7 Home Premium. And with Microsoft in a serious battle to reverse its decline in revenue, anything that suggests lower margins is a big problem. Ballmer could perhaps take hope in the comments made earlier this week by Intel Chief Sales and Marketing Officer Sean Maloney, who said that the netbook market had "matured," and that first-time buyers were more likely to gravitate toward a high-end desktop or laptop. But hope doesn't exactly fill corporate coffers, so instead Ballmer's engaged in pushing "ultrathin" laptops, which theoretically take netbook portability and marry it to a larger screen, more powerful processor and higher price. "When a customer says, 'We want a netbook with a bigger screen, we'll say, 'Here's an ultrathin,'" Ballmer said during Microsoft's annual Financial Analyst Meeting on July 30. "We want people to be able to get the advantages of lightweight performance and be able to spend more money with us." In other words, it's time for the villagers to trade in those pointy sticks for a couple of torches. Supposedly, PC manufacturers will roll out a whole range of these "ultrathin" devices come the holidays. Priced at a point above traditional netbooks, they might effectively solve the margins issue for Microsoft, which could have manufacturers load those systems with a version of Windows 7 that's not the Starter edition - as well as other Microsoft applications such as Office. And depending on that price-point, the ultrathin notebooks have the potential to cannibalize the netbook market in a way that makes up for the netbook market possibly cannibalizing the traditional PC market, if that makes any sense. (The one casualty of an ultrathin PC flood, of course, would be Dell's Adamo, which up until now thought its sole competition was the ultra-expensive Macbook Air. Oops.) Microsoft's solution to the netbook problem - which it keeps insisting is not a problem - seems to be to try to shift the entire PC industry in a slightly different direction. Setting the monster's lair on fire could work - if customers are willing to spend on a bigger and sleeker system. The recovering economy, as with all such things these days, could be the ultimate arbiter. |
Comments (10)
So Ballmer is basically hoping that Netbooks will become more powerful, enough so that they will be capable of barely running Windows Seven, so that MS can charge more than they are presently charging for XP Home. XP Home has been reportedly selling for anywhere from $5 to $25 per OEM Netbook in the USA, depending of course on which OEM, and what secret agreement they have with MS.
Now the part about "Microsoft claims that Windows runs on 96 percent of netbooks." So be mentioned here somewhere, thats only for the USA. Not Europe, not the rest of the world.
A couple of points about these Intel based Netbooks that MS has not figured out yet. 1. Most Users, prefer XP Home to Vista, this in itself is driving Netbook sales. 2. The price is everything in a time of the worst recession on record. 3. Should Ballmer be successful, and manage to get a barely able to run Windows Seven that costs more on Intel Netbooks, they will have to compete with Linux (as in free) ARM Netbooks coming out soon. 4. Getting the cost of the Windows license up, by putting Seven on them, may cause some OEM's to consider installing Linux on some.
I don't see MS being able to reestablish the same profit ratio that it once had when this recession is over with Windows client anymore for these reasons and more. Also, its likely that the EU will fine MS for the IE bundling as well, and the Office formats with the ISO corruption coming up beyond that. And if the DOJ was not in MS pocket, they would be looking at that 96% of Netbooks number, and be doing something about it. Another wild card could be if Mac was to increase manufacturing ability and decide to start making $800 laptops. This is possible, although it cannibalizes to some extent on its higher end sales.
Posted by Chips B Malroy | July 31, 2009 4:04 PM
"We want people to be able to get the advantages of lightweight performance and be able to spend more money with us."
Still burying your head in the sand eh? Today I bought a Samsung NC10 (£288) - comes with XP and I can't wait to take it with me travelling. 10" screen, wifi, 160Gb HDD for photos/music, itunes etc. Why would I want to spend more money on MS software? If I want to work on it, then I dial into work using a RAS - all web based Office, Outlook etc. Why would I want that install on my laptop? If I want to write a letter or give a presentation myself, there's always free software available.
People want portability - Web 2.0 changed computing forever. People now make the content - not corporations. If the average person sends some emails, browses the web, uses iTunes and syncs their iPod or takes photos off their camera, why do I need Vista or Windows 7 or some dual/quad core processor?
Microsoft, the computing landscape has changed - and I for one am very glad I don't have to pay out hunders of dollars on needless software features which I'll never use.
Posted by Michael | July 31, 2009 6:44 PM
Windows 7 will be adopted by existing Windows XP based Netbooks because consumers want more features, performance and a cleaner interface that guarantees more efficiency. Features like Interactive Thumbnail previews, Aero Peek make working on a small screen factor so much better. Also Windows XP Home Edition supports upgrades to premium Windows 7 SKU's and its easy too. So, consumers are most likely to choose it when the time comes. With the rave reviews Windows 7 has been getting too, that additional 4 percent will be enjoying the rich, complete benefits the OS has to offer.
Posted by Andre Da Costa | July 31, 2009 7:55 PM
Trying to sell the customer what they do not want is sheer arrogance and will not win the OS/platform war. OEMs that follow M$ down this road will deviate when other suppliers show growth and they shrink.
Posted by Robert Pogson | July 31, 2009 8:28 PM
>> The one casualty of an ultrathin PC flood, of course, would be Dell's Adamo, which up until now thought its sole competition was the ultra-expensive Macbook Air
Um...the lower priced versions of these notebooks are the exact same price (1499). Of the more expensive versions, the Air (1799) is $500 cheaper than the Adamo (2299)...
Posted by ged | July 31, 2009 10:49 PM
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Posted by Yoram | July 31, 2009 11:01 PM
"Microsoft claims that Windows runs on 96 percent of netbooks"
That number only applies to the USA only. In Europe the number of Linux Netbooks is much higher. In fact in one country in the EU:
Two Bestsellers in Germany.
http://www.linuxtech.net/news/Linux_Laptops_Bestsellers_in_Germany.html
Good Luck to Ballmer trying to raise the price in the middle of the worse recession on record. Hopeless, Ballmer is. People are going for cheap mostly, because they don't have a lot of extra money, or feel they need a reserve, in case they lose their jobs. Consumer spending may not increase for awhile. But I guess a guy who was worth 14 billion at one time and still a billionaire, has lost touch with the public, and those who are his customers. Yes selling Windows for less is going impact the bottom line of MS, but accept that its not the fact, that Windows is a commondity, and the trend will be that the price must come down even further.
Can nothing save MS on the low end? Will Seven (Vista with a service pack) save Microsoft's huge profits from decline? Nothing will save MS from profits declining, that is the bottom line. Consumers are now speaking with their wallets, and OEM's had better listen. MS has given Vista and now the "new" Vista (Seven) to the masses in hope of keeping its base. But the masses did not want Vista, so will they want a "better" (as Ballmer calls it) Vista (Seven)? I think not. What the masses wanted from MS was an improved secure XP, and their did not get it. In fact, Seven will unlikely run on most old XP hardware.
It has to be asked, why MS does not give the public what it wants? Instead it gives Vista/Seven, a piece of DRM bloatware that uses so many resources that it would not run on most older computers. While Vista uses appox. 6x the resources as XP, Seven will be much more efficent, and only use about 5x as much. So where did all the extra resources go? If you cut Vista or Seven to the bone, disable Aero etc, still it cannot come close to the resource level as XP. The conclusion is DRM, and the subsystem changes that DRM forced into the Video and Audio systems, with protected pipelines etc. This is not what consumers wanted, its what Bill wanted with his Hollywood pals.
The question needs to be asked, why does MS fix that that is not broken? Like the taskbar, and the IE in Vista and Seven? When their users are abandoning Windows to move to Mac and Linux, in order to get away from the Malware problems. Why not try to fix the malware problem in Windows? That is the biggest problem, instead MS just trys to do something very incremental, like UAC, which is very minimal at best.
If MS wants to be relevant in 5 years time, it must start giving people what they want, and it must address the issues that Windows has in a far more forceful way than it has. The Malware problem cannot be entirely fixed in Windows anymore, as it has gone on for too long, but it can be far more greatly secured than it has been. They did it for the US Army with Secured Windows. Windows should install with a "Normal" account as default, IE, Outlook, WMP, windows messinger, need to be completely stripped out, which gets rid of ActiveX as well. Fat chance of this happening at MS with control freak Ballmer in charge, but this is exactly what needs to be done to make Windows somewhat secure as an internet OS out of the box.
Now a suggestion for the high end. The Windows OEM's need to setup their expensive $1000 plus laptops as dual boot systems, XP and Linux. Forget Vista, and maybe forget Seven, if you want sales. Sue MS if they object to OEM's putting dual boot on your computers, or just stop making expensive laptops.
It would be nice if MS Watch would stop holding all my comments. Thanks.
Posted by Chips b Malroy | August 2, 2009 5:57 PM
The truth of the matter is that Microsoft is realizing that they cannot keep giving away free licenses to the now 8-year-old Windows XP OS. They saw that OEMs were just loading Ubuntu Linux on these machines for cheap so Microsoft stepped in (or should I say stepped in it), wanting to maintain their Windows monopoly on every machine that's not a Mac. and started giving away XP. Then it hit them that the best way to make money was not, in fact, by giving away their OS.
When companies like Apple were coming out with ultrathink notebooks Steve Ballmer was laughing at them! "Where's the optical drive!?" he bellowed. Then came the netbook and it took the world by storm... optical drive free.
Steve Ballmer and the hoards of Microsoft drones laughed, Apple can't 'just walk in and figure out the smartphone' they scoffed. Now Microsoft is trying to encourage iPhone developers to port their creations over to WinMo.
Now that they've come to realize that Apple been making right decision after right decision Windows is now pushing OEMs to make Ultrathins. And cell makers to move into the touch (and multi-touch) arenas. And is opening Apple... er, Microsoft stores right next to Apple stores where they will sell... boxes of Windows 7? Re-branded Logitech Mice and Keyboards? Who knows.
Ballmer and the MSFT crew need to get out in front of the curve and not just rely on copying old good ideas by Apple, Google, and the Open Source community.
I guess this shift back to real notebooks shows that Microsoft and it's OEMs 'won' the race to the bottom, while Apple is stuck growing like mad and dominating the premium notebook market. But that's probably not a market MS is interested in, right? Who wants to compete with the 'ultra expensive' MacBook Air, right?
Posted by Conrad | August 3, 2009 1:14 AM
"....a number (as I'm constantly reminded by loyal readers) that does not take into account those users who purchase a Windows-equipped device and then wipe it clean in favor of a Linux or open-source operating system..."
How about those users that took a Linux netbook and returned it back, bc it was not what they wanted..which according to some estimates is at 25% of all Linux based netbooks sold...
Posted by evan2k | August 4, 2009 12:03 PM
@ evan2k. You read my freakin' mind. I am planning on buying a netbook a soon as I get my financial aid and the first thing I'm going to do is wipe it clean of XP and install a net book specific version of Linux. I will never use Windows again, unless I am forced to. (and yet, I still use hotmail with all my anti-Microsoft rhetoric) Their grip will be loosened soon enough ala` gmail.
Posted by cmltow | August 13, 2009 12:33 PM