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Microsoft Risks Being Stuck in a Netbook Price War

03.04.2009
Netbook has become as trendy a word as "cloud" and analysts predict sales are . But the netbook pricing game is getting complicated as OEMs try to simultaneously add features and keep prices down. The bad news for ? No matter whether the OEMs stick to US$300 price points or push higher, Microsoft's overall profits are vulnerable, say industry analysts.

On one hand, Microsoft today is running Windows XP Home with on 90 percent of all netbooks, according to research firm The NPD Group.

Yet cheaper, Linux-based netbooks that plan to run on low-cost but efficient processors from ARM pose a steady , one that could increase .

Further confusing matters: PC OEMs such as Asus, Dell, and Samsung, can't seem to decide whether they and cost more than $500 or be ultra-basic tiny laptops that cost less than $300.

Analyst of independent research firm Directions on Microsoft says that netbooks will continue to be defined by price, not features. "Soon it will be hard to consider something over $500 to be a netbook," he says, adding that inexpensive netbooks offer the "greatest potential for Linux to grow with consumers."

Microsoft partner Hewlett-Packard may have just contributed to that Linux growth. This week, the Wall Street Journal reported that . It is still unknown if HP will use ARM processors or Intel's lower-end Atom processors.