Ballmer: Microsoft Will Not Drop Windows OEM Pricing

Microsoft

In a question-and-answer session before about 5,000 IT executives here at the Gartner Symposium/ITxpo 2002, Ballmer said he does not believe a $20 drop in the estimated $50 price of Windows to OEMs would spark a significant increase in PC demand, but rather would damage Microsoft's ability to do software research and development.

"Will that really drive a lot of demand? No," Ballmer said. "Will it wipe out our ability to do innovative work like Windows XP? That it would do. You take $20 off the price of Windows, and our ability to do innovative R and D goes out the window. And I don't think we'd see a big boom in demand if computers were $20 cheaper."

Ballmer also said a drop in the OEM price of Windows could have unexpected reverberations. "There are more logistical nightmares associated [with Windows OEM Pricing than Licensing 6.0," he said. "You think we had licensing problems here [with Licensing 6.0. Boy would we have pricing and licensing problems with our OEM customers in that scenario."

Ballmer said the price of Windows has been the same for eight years. "And I think we deliver more value today than we did then," he said.

Windows OEM pricing is publicly disclosed on the company Web site, he said.

Ballmer's comments came in response to a question on what some call Microsoft's "Windows tax" on PCs. Gartner Vice President Tom Austin pointed out that Walmart.com sells a PC for $199 without Microsoft software or a monitor. He noted that some believe Microsoft Windows and Office suite software make up 40 percent of the price of a PC.

Ballmer, however, countered that the $199 Walmart system does not reflect the true cost of a system and is sold at a loss. In addition, he pointed out, that the product is not featured in Wal-mart stores because it is not a big seller.