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Windows Vista retail doomed unless Microsoft cuts prices?

by Bob Crabtree on 21 January 2007, 14:27

Tags: Microsoft (NASDAQ:MSFT)

Quick Link: HEXUS.net/qahq3

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Smoke and mirrors


Windows Vista logo

It's starting to look as thought Microsoft has finally twigged that the retail launch of Windows Vista at the end of the month is likely to be an almighty flop, at least in the USA and Canada, but the company seems to be ignoring the consequence of inflated prices in the rest of the world.

Really? Well, what do you make of the fact that as soon as the operating system goes on sale on January 30, Microsoft will be offering buyers in those two countries a couple of further copies of the same version at an ultra-low price - $49.99 each - and will do so until June 30?

Do you seriously believe that this 'Windows Vista Family Discount' scheme is the sign of a company confident that it will shift the new OS by the truckload?

On the contrary. What it indicates to us is that Microsoft is trying to find a way to make the prices of the retail versions look at least half respectable despite the fact that everybody in north America who knows the pricing - apart from Microsoft - understands that all versions are pitched way too high.

The discount scheme isn't, we reckon, going to make a scrap of difference. The only thing that will do that is a complete climb-down on the stupidly high prices Microsoft has decided to charge.

We've included those price below - eleven days before launch.

Vista suggested retail prices for the USA (VAT-inclusive £ equivalents in brackets):

Home Basic - SRP $199 (£118.39); upgrade $99.95 (£59.48)
Home Premium - $239 (£142.22); upgrade $159 (£94.60)
Business - $299 (£177.91); upgrade $199 (£118.39)
Ultimate - $399 (£237.42); upgrade $259 (£154.11)


If our theory is correct, as it becomes clear after Jan 30 that all those copies of Vista are sitting on shop shelves and in warehouses unsold, Microsoft is going to have to do something a great deal more positive to encourage lift-off than offer low-cost deals for further copies that people buy.

That means doing what it's being trying to avoid - make Vista far more affordable and, hence, far more attractive.

If prices are too high in north America - as they absolutely are - it's hard to come up with suitable descriptions for the even-higher prices elsewhere in the world without resorting to foul language and innumerable exclamation marks.

Mind you, such descriptions would be purely speculative because Microsoft has yet to formally announce pricing outside of north America - it's certainly not said what they'll be for the UK and wouldn't do so today when we asked.

The problem with this wait-and-see strategy is that - unless prices turn out to be massively cheaper than we anticipate - all Microsoft will have done is delay finding out about the negative responses worldwide until far closer to launch day, by when it will be far too late.

In the UK, most people are gauging prices from the few online sites that dare to show them.

We located a small number of UK firms that are taking pre-orders for Vista but only one them, PC World, we'd judge to be a big-name operator. Our presumption is that Microsoft has in place an embargo on pricing information and taking orders and that most firms are stick to that.

Below are the VAT-inclusive figures from PC World and another site:

PC World (add £4.95 for delivery)

Home Basic - £154.99; upgrade £99.99
Home Premium - £184.99; upgrade £149.99 inc VAT
Business - £250; upgrade; £189.99
Ultimate - £325.00; upgrade £249.99


SaverSoftware (add £3.63 for delivery)

Home Basic - £184.99
Home Premium - £224.49
Business - £294.99
Ultimate - £325.00


So, the best case from those UK sites is that you'll be able to upgrade to the version of Vista that nobody will wants - Home Basic - for a hundred quid (that compares with under £60 in the USA, and that after adding on VAT at 17.5 per cent) or do the same with the Premium for £150 (under £95 in the USA).

There isn't any good news about the version that we'd mostly likely want to use - Ultimate - because the very least we're going to have to pay is £250 (under £155 in the USA) and a fresh install will cost £330 (under £240 in the USA).

Clearly, the UK prices we've quoted are a total rip-off compared with the USA - that's a reflection on Microsoft not the resellers - and, that being so, you might feel doubly hard done by to learn that the discount deal for multiple copies has yet to be extended anywhere else in the world.

Naturally, we'd like to be able to buy a couple of extra copies of Vista for $50 dollars a piece - the equivalent (when you add VAT) of just £29.76.

But, frankly, we think the deal is totally misjudged and will not bring in a significant number of extra sales.

Even if we could buy two further copies of Ultimate for a total of just £60 - and be sure the rip-off-UK thing means the price would actually be a whole lot more - that's not going to make us feel one single bit better about paying out £330 for the first copy, especially when we know the price in the USA, even if you factor in VAT, is the equivalent of £237.42.

And, most people who buy Vista retail - irrespective of the country they're in - are only going to want one copy or two at most, so the discount deal will have limited general appeal.

Now we don't know about you, but we're wondering where Microsoft's had its head over the last few years.

The one over-riding trend we've seen is that prices are falling for PCs and peripherals and that a lot of good software and operating systems are available free.

Against that background, and also realising that Apple's far more affordable (and some would say far-better) OS X operating system is now an attractive rival to Windows, it seems to us that Microsoft needs swiftly to remove its head from place it's been so that is able to face up to the conundrum it's got to deal with.

It needs to figure out how best to recoup the billions of dollars it's invested in the development in Vista and then move things forward so that Vista retail starts bringing in profits. To us, though, it seems to have chosen the route least likely to succeed - overcharging massively for the OS in a market where the trend, as with all consumer products, is towards ever-lower prices.

There really is nothing in the operating system to convince anyone but the seriously well off to pay the north American' suggested prices or the prices we're expecting to be asked to pay in the UK.

We say this even before considering the fact that bringing a PC up to the spec that Vista needs could cost even more than the OS itself, where ever in the world you buy.

Of course, some people will buy Vista retail. Trouble is, many of them, it seems, will swiftly figure out that they've opted for the wrong version.

At least, that's what we're forced to conclude by Microsoft also announcing this week a series of upgrade prices for Vista users wishing to move to better versions.

Microsoft suggested prices - Vista-to-Vista version upgrades:

Home Basic to Home Premium $79
Home Basic to Ultimate $199
Home Premium to Ultimate $159
Business to Ultimate $139


This looks to be another north-America-only offer but even were it to come to the UK - and be properly adjusted for the prevailing exchange rate (highly unlikely we know) - the prices would still be far too high.

We tried to get Microsoft to comment about our views on Vista but, although the response came back swiftly, it didn't address the issues.

Check out that email exchange on page two, where you'll also find our sad conclusion about the prospects for Vista retail...