Microsoft hits Europeans with hefty Anytime Upgrade prices

Some in-place Windows 7 upgrades cost 163 per cent more in the EU than in the U.S.

Microsoft may have denied that it's gouging European customers with its Windows 7 pricing, but an analysis by Computerworld shows that EU buyers will be paying as much as 163 per cent more for some of the company's in-place Anytime Upgrades.

In late June, Bill Veghte, the senior vice president for the Windows business group, rejected claims by a British financial newspaper that European consumers would pay more for Windows 7 because of a move it made -- since retracted -- to dump Internet Explorer (IE) from the new OS.

Follow-up messages from Microsoft's public relations firm at the time took exception to a Computerworld story that concluded Europeans would pay up to twice as much as U.S. customers for packaged copies of Windows 7, calling its headline "inaccurate."

But prices of the recently-announced Anytime Upgrades are even more expensive for European Union (EU) customers. Anytime Upgrades let users move up the Windows 7 edition stack by buying, say, an upgrade from Starter, the version slated for the very cheapest netbooks, to Home Premium simply by purchasing a product key to "unlock" the more expensive edition's features.

Anytime Upgrades will be available starting Oct. 22, the Windows 7 debut date.

Microsoft has pitched the Anytime Upgrades to Wall Street as one way it hopes to boost Windows revenue, and has been most aggressive in touting them for netbook owners, who may want to move up to Home Premium. "A customer may purchase a netbook thinking they would primarily use it for e-mail," a Microsoft spokesman said last week. "Over time, they find they are using that netbook as their primary every-day PC. That person then decides they want their netbook to do more."

According to Microsoft's price list, U.K. customers will pay up to 104 per cent more for an Anytime Upgrade, depending on the upgrade chosen. A Starter to Home Premium Anytime Upgrade, for example, is priced 34 per cent higher in the U.K., when British pounds are converted to dollars at the current exchange rate. (U.S. prices include sales tax -- the average combined sales tax burden in the U.S. was 8.6 per cent in 2008 -- for a better comparison with Europe's Value Added Tax, or VAT. That consumption tax is included in Microsoft's U.K. and EU prices.)

The biggest gap between U.S. and U.K. prices is for the Home Premium-to-Professional Anytime Upgrade; U.K. buyers will pay more than twice as much. For a Professional-to-Ultimate upgrade, however, the two market's prices are essentially a wash.

Prices listed in Euros show an even greater disparity when converted to dollars. The Home Premium-to-Professional Anytime Upgrade costs 163 per cent more in France and Germany, for instance, than in the U.S., while the Starter to Professional is 111 per cent more. The most likely scenario, using Anytime Upgrade to bump up from Starter to Home Premium, costs 23 per cent more in the EU.

Computerworld also compared U.S., U.K. and EU prices for Anytime Upgrades by calculating their cost as the percentage of the price of a popular netbook, the ASUS Eee PC 1000HE, which on Monday was the best-selling netbook on the U.K. version of Amazon.com. The Eee PC is equipped with Windows XP Home, not Windows 7 Starter, as that's not yet available, but analysts expect that the lowest-priced netbooks will run Starter. For its part, Microsoft has laid out very specific guidelines for the machines it will allow computer makers to ship with Starter; the ASUS machine meets those Microsoft specifications.

As a percentage of the Eee PC 1000HE's purchase price -- $US382.47 on Amazon -- Anytime Upgrade prices in the U.S. ranged from 23 per cent (for Starter-to-Home Premium) to 47 per cent (for Starter-to-Ultimate).

U.S. percentages were generally higher than those in the U.K., where the same system costs £340.99. British buyers must fork over 21 per cent of that to upgrade from Starter to Home Premium, 41 per cent to move from Starter to Ultimate.

EU consumers will be hardest hit. Although the Starter-to-Premium Anytime Upgrade accounts for 19 per cent of the EUR399.95 cost of the netbook -- less than the percentage U.S. buyers pay for the same upgrade -- Starter-to-Professional and Starter-to-Ultimate consume 46 per cent and 51 per cent of the ASUS machine's price, considerably more than the 35 per cent and 41 per cent U.S. users would have to fork over.

Even paying less than consumers in the U.K. and the EU, U.S. users may not find Microsoft's Anytime Upgrade prices attractive. At suggested list prices, there's only an $US80 difference between the retail copies of Home Premium Upgrade and Professional Upgrade, and $US100 between the two "Full" editions. The Anytime Upgrade from Home Premium to Professional, meanwhile, costs $US90.

It's even less enticing to take the Home Premium-to-Ultimate path using Anytime Upgrade. Microsoft's priced that at $US140, higher than both the $US100 difference between the retail Home Premium Upgrade and Ultimate Upgrade, and the $US120 difference between the "Full" editions of those versions.

At least one analyst has dinged Microsoft for the high prices. "Microsoft needs to be more aggressive," Stephen Baker, an analyst with the NPD Group, said in an earlier interview. "At those prices, there won't be many opportunities to [convince users to] trade up. If people are buying cheap [PCs] they're buying cheap for a reason."

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Gregg Keizer

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