Microsoft has revealed that, for a $1000 PC, it has always charged the OEM about $50, or five percent, for Windows.
At the Jefferies Annual Technology Conference, Charles Songhurst, general manager of Corporate Strategy at Microsoft, answered a rather long onslaught of questions about where Redmond is heading. At one point, Songhurst started talking about how investors were asking Microsoft what its standpoint was on the "skewing PC price point" (i.e. "the netbook effect"). Songhurst explained that it was more interesting to look at "the growth merchandise volume of all PCs sold" despite the "emergence of a lot more segmented SKUs." In other words, he believes that although the price range for the PC is widening, the market is still growing, and that's all that matters to Microsoft.
Songhurst went on to reveal a number that Microsoft has made a point not to disclose to the general public: how much it charges OEMs for Windows. "If you think of the $1,000 PC, which has kind of been the benchmark for the last decade or so, then we've always charged about $50 for the copy of Windows for that PC," Songhurst revealed.
"So that's five percent. So if you think about charging $100, $200 or if you think about a super high-end PC, you know the Sony Vaios or anything that's there for around the $1000 mark, or the Alienware PCs that are even higher, if we can get that constant percentage then we should be indifferent to the number five points in the market," Songhurst continued. At first, we asked ourselves if Microsoft would really be happy to get $5 for Windows on a $100 PC but of course we quickly remembered that there really aren't $100 PCs yet, so that really wasn't a fair number to work with. Given that a PC can easily range between $300 to $3,000 nowadays, the five percent of $15 to $150 easily covers all the lower-end price speculation that we've seen in recent years.
Rumors from June 2009 placed Windows 7 Starter at about $45 to $55 per copy. Again, no official numbers are known for Windows XP Starter, but in May 2005 PC makers said they were paying between $15 to $35 for each copy, and in April 2009 it was speculated that Microsoft was actually charging under $15 per copy.
Songhurst went on to say that most netbook buyers already own a few other PCs, and for those that don't, they probably would not have bought a PC in the first place because they couldn't afford it. In both cases, the software giant sees this as an opportunity to cash in, as opposed to seeing the situation as a new market that is stealing sales from its older, more expensive, brother. "So as long as they [cheap PCs] are not cannibalistic to the total PC demand. We don't think they will be because we don't think the value of the PC is decreasing. We think that the net's beneficial to us."
Finally, after all that PC talk, Songhurst specifically called Windows 7 a "compellingly good product," and began proclaiming that there was a very bright future for Windows on the horizon, but not just from the consumer perspective: "I think what you're going to see over the next few years is people rewrite the sort of story of the operating system. What you hear at the moment is a lot of commentary about how it's commoditized, how it's hard to get more innovation in it, and I think what you'll find is a renewed belief in innovation, and a renewed belief in the Windows franchise."
He finished all Windows-related questions by saying "When Windows is executing well, Microsoft is in good shape." Turning that statement around, we can say that Microsoft recently has been doing poorly due to Windows Vista not executing as well as previous Windows versions. We've said it before, and we'll say it again: Microsoft has a lot riding on a successful Windows 7 release.
More here: www.arstechnica.com
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