Report: Microsoft Talks Pricing For Windows 7 Netbooks

According to a recent report by Digitimes, Microsoft is telling netbook vendors that it will charge between $45 and $55 for Windows 7 Starter, compared to between $25 and $35 for XP Home, the version that accounts for about 90 percent of the current netbook operating system market.

If Microsoft refuses to budge, some netbook vendors may decide to continue selling Intel Atom N270 and N280-based netbooks with XP instead of Windows 7, according to the Digitimes report.

Netbooks have been a thorny issue for Microsoft. Sales are chugging healthily along -- IDC expects 26.4 million netbooks to ship this year, which would represent a year-on-year growth rate of 127 percent -- but Microsoft reportedly only makes $15 per netbook, compared to between $50 and $60 for PCs running Windows.

With Windows 7, Microsoft needs to find a price point that will enable it to pull in more revenue without driving users to cheaper Linux based alternatives such as Android and Moblin. Microsoft has already reversed course on earlier plans to limit Windows 7 Starter to three simultaneous running applications, possibly to avoid the appearance of trotting out an artificially crippled OS.

Still, Microsoft has been working hard to draw a line between netbooks and more expensive notebooks. Last week at the Computex 2009 conference in Taiwan, Microsoft officials suggested that the term "netbook" should be abandoned in favor of "low-cost small notebook PC," to better reflect the fact that today's netbooks have capabilities that extend far beyond Web browsing.

Microsoft will begin sales of Windows 7 through retail and pre-installed on new PCs on Oct. 22, and is expected to reveal pricing for the six different Windows 7 SKUs sometime this month. Microsoft is giving OEMs until June 30, 2010 to ship XP on netbooks.