Can Microsoft’s OS Versions Survive the Netbook Challenge?

1Executive Summary

With positive Release Candidate reviews, it looks like the Windows 7 launch in October will go smoothly. However, its impending arrival is creating challenges for Microsoft at the bottom of the hardware spectrum. Netbooks are a category too successful to ignore, and Microsoft is aiming to beat out Linux as the netbook OS of choice with the Starter Edition version of Windows 7.

Microsoft wants to see its products on everything from netbooks to servers. But ultimately, the company’s tiered pricing and multi-edition strategy is wearing thin in a world expecting 99-cent mobile apps, free or cheap cloud productivity solutions and free Wi-Fi connectivity on the road. The story with Windows 7 will not be if it outshines Vista (it will), but rather if it’s the beginning of the end for the artificially tiered, restricted and priced operating systems.

Hardware Shifts Downward

With roots in the One Laptop Per Child initiative, the ASUS Eee PC began the netbook phenomenon. Too small to be a laptop, yet big enough to work on for several hours, it offered just enough for web browsing, email and other online tasks while being light and cheap. Initially, most netbooks ran Linux, but when it became clear the category wasn’t fading away, Microsoft reacted by low-balling the OEM price for Windows XP Home to about $15 and licensing it for netbooks.

For consumers, netbooks running Windows were an easy sell. Buying to supplement your desktop? No problem, it runs all your apps. And no new OS to learn. We’ll never know if netbooks would have been such a breakout success running Linux, but with Windows they’re selling in the millions.

Is There Life After XP?

Bringing XP out of retirement for the netbook market was a good idea at the time. However, it puts Microsoft in an awkward position with the roll-out of Windows 7. Microsoft can’t use the same netbook strategy with Windows 7 that it employs with Vista (i.e., it can’t just sell a cheap low-end version of the “old” OS). For one thing, people like XP, while Vista’s reputation in the marketplace is that of a troubled OS, slow and with numerous problems. Not to mention that Vista, with its relatively high CPU, memory and graphics requirements, simply isn’t well-suited to netbooks’ stripped-down hardware.

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  1. James Kendrick Friday, June 26, 2009

    I’d say they stuck with a 10″ screen due to cost and to keep it in the netbook category. HP sells many other notebooks and OS choice likely wasn’t a factor in the specs for this one.

  2. James,

    HP’s new 5101 may be an example of a machine hampered by the new MS restrictions. A nice 95% size keyboard in a machine that could easily support an 11- or 12-inch display. But, no, it’s got a 10″ screen swallowed up by the large bezel. Did HP use 10″ to ensure it’d be eligible for Starter Edition? I’d say there’s an excellent chance of that.

    While the ridiculous RAM and hard drive restrictions can be overcome by the user — though they should not have to be put through that hassle — the screen size is permanent. The user is stuck with it. It’s nuts.

  3. James Kendrick Wednesday, June 24, 2009

    This hardware restriction is madness but is nothing new. Windows XP has similar hardware restrictions now and has for some time. For example, HP sells several netbooks with either Linux or XP installed. If you configure a Linux version, you can order with up to 2 GB of memory.

    The same netbook configured with XP however can only be ordered with 1 GB of memory due to the licensing restrictions of Microsoft. HP’s newest netbook announced just today gets around this by making the memory access door “tool-less”. HP can only sell you the netbook with 1 GB of RAM but you can get to the memory slot with just a couple of levers and upgrade to 2 GB yourself. Isn’t this silly?

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