Page 2

By David Coursey  |  Posted 2004-11-19 Print this article Print

However, the biggest challenge to be overcome in creating a $100 Windows machine may not be the actual hardware cost, but what Microsoft charges for the Windows OS. Presuming that hardware OEMs are paying no more than $10 a copy for a non-Windows operating system, using Windows instead would raise the current $175 price to $225 to $250. This estimate is based on Microsofts reported $50-to-$75-a-copy pricing for Windows XP Home Edition sold to hardware manufacturers.
This is roughly what Microsoft has been charging on a per-PC basis for as long as I can remember. Of course, that pricing started back when you couldnt buy a decent PC for less than $1,000. As hardware prices have fallen, Microsofts share of PC revenue has increased, even if its pricing hasnt.
Enter Starter Edition, which reportedly sells to OEMs for about $35 a copy. Apply that to my $175 PC and the price comes up to $200. This is interesting considering that the low-end "Starter Edition" PCs being sold in Thailand sell for the equivalent of $300 to $400. Read more here about Microsoft readying its latest "XP Starter Edition" releases to be sold in Thailand, Malaysia and Indonesia. For that money, I can go to several local stores and purchase a PC with a fully functional copy of Windows XP Home Edition. So much for Starter Edition making PCs less expensive. Over time, however, this will probably happen. But if Starter Edition is good enough for the teeming masses, why isnt it good enough for us? I know potential customers in the city where I live who dont need file or print sharing but do need better help files and videos. These are kids and the elderly, who could also use a price break. Is it fair for Microsoft to charge a lower price in the developing world than it does here at home? Dont low-income Americans deserve the same price break Microsoft gives a Russian? The case can me made that "poor" in the United States doesnt compare with "poor" in Thailand, but I suspect a person there who can afford a $300 Starter Edition PC lives as well or better than an American who can only afford such a computer. Related to this, I wonder if Microsofts OS competitors in foreign markets could claim that Microsoft is "dumping" software for less than what it costs to produce, based on its American and European pricing? Thats one for the World Trade Organization, I suppose. Lowering prices to combat Linux is a Catch-22 for Microsoft, which needs the huge profits Windows and Office generate to support the unprofitable parts of its businesses and its giant research-and-development effort. For more insights from David Coursey, check out his Weblog.

Ballmer has correctly noted that the world really does need a lower-priced Windows PC if computing is truly to become global (and desktop Linux isnt). And, to be honest, I dont mind paying a little more for my OS and letting poor people pay a little less. Computers really do change lives, mostly for the better. But in a free-market, free-trade world is that sort of pricing really fair? The problem for hardware vendors who share Ballmers vision is designing and manufacturing a PC that can be sold at such a low price point. For Ballmer, the problem is making the numbers work over the long haul. That means competing with Linux on price in developing nations while still raking maximum profits out of developed ones. It will be interesting to see whether Microsoft customers in some countries are willing to pay higher prices that subsidize other customers buying essentially the same product for less money just because of where they happen to live. Check out eWEEK.coms for Microsoft and Windows news, views and analysis.

One of technology's most recognized bylines, David Coursey is Special Correspondent for, where he writes a daily Blog ( and twice-weekly column. He is also Editor/Publisher of the Technology Insights newsletter and President of DCC, Inc., a professional services and consulting firm.

Former Executive Editor of ZDNet AnchorDesk, Coursey has also been Executive Producer of a number of industry conferences, including DEMO, Showcase, and Digital Living Room. Coursey's columns have been quoted by both Bill Gates and Steve Jobs and he has appeared on ABC News Nightline, CNN, CBS News, and other broadcasts as an expert on computing and the Internet. He has also written for InfoWorld, USA Today, PC World, Computerworld, and a number of other publications. His Web site is

Submit a Comment

Loading Comments...
Manage your Newsletters: Login   Register My Newsletters

Rocket Fuel