Windows Vista price cuts not about competition

Windows Vista Microsoft’s price cuts, announced Friday, to its Vista operating system are a sign the U.S. economy is ailing and that consumers don’t need to upgrade to a new version of Windows nearly as often.

For those PC users that missed it, the company said it will cut prices (in the U.S.) of Windows Vista Ultimate from US$299 to US$219 while the price for an upgrade version of Vista Home Premium will be slashed from US$160 to US$130.

The news made for lively newspaper stories and blog posts on Friday that described the competition between Microsoft and Apple.

It is true Apple’s Leopard OS is a vastly improved product & shipments of its Mac product lineup have jumped sharply in recent years. But competition on the OS front won’t be on Microsoft’s home turf which is the PC hard drive.

More to the point, Microsoft is having some trouble selling its operating system to consumers in part because of the ailing economy in the U.S. and also because XP is good enough negating the need to buy the latest and greatest operating system.

Consumers and businesses may also be waiting to upgrade to Vista’s successor. People have learned over the years it’s best to wait for at least a year after a release date before buying a Microsoft product as bugs and other hiccups have to be worked out.

Others believe Microsoft is losing pricing power, a plausible theory as well.

What’s for sure is that Apple or the Linux camp won’t beat Microsoft at its own game. Further market share gains on the part of Microsoft’s competitors but those companies will never beat Microsoft at its own game.

Nor are the price cuts about some sort of migration to the Web thus negating the need for Vista or any Microsoft OS. It’s that people simply don’t feel the need to upgrade nearly as often. The Vista horror stories, of which there seem to be no shortage of on the Web, have scared people off at least for the meantime. It’s about relevance. It’s harder and harder for ANY OS provider to sell an upgraded version.

The telltale sign of the operating system’s relevance, at least for Microsoft, will be future price cuts. As Nick Carr states: "To get a read on the long-term financial prospects of Microsoft’s core business, don’t focus on the market share report; look at the price tag."

March 6, 2008 | Filed Under News Items and Commentary 

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