The low-cost laptop offer Microsoft can't refuse

Low-cost laptops don't pack enough power to run Windows Vista, so Microsoft must either revamp its OS strategy or concede that growing market segment to Linux

As the release of low-cost laptops based on Intel's upcoming Atom processor draws near, Microsoft is getting boxed into a corner. The software company plans to stop selling most Windows XP licenses after June 30, yet most of these low-cost laptops won't be powerful enough to run Vista when they arrive later this year.

That leaves Microsoft executives with a choice: Do they extend the availability of Windows XP for low-cost laptops, or possibly concede this nascent market to Linux?

The poster child for the low-cost laptop is Asustek Computer's US$249 Eee PC, which hit the market in October last year and runs the Xandros distribution of Linux. Consumers in the US and elsewhere embraced the laptop, which uses a version of Intel's Celeron M processor, for its small size and ability to perform basic tasks like Web surfing and e-mail. It became something of an overnight sensation, and that success caught the attention of other hardware makers, including top-tier PC vendors.

The Eee PC's success wasn't possible without Intel's support. The chip maker was initially hesitant to embrace Asustek's push into low-cost laptops for fear it would drive down margins for its mobile processors if users opted to buy low-cost laptops instead of more powerful -- and more expensive -- models. But Intel eventually decided that the opportunity to expand the size of the overall laptop market outweighed the risks of lower profit margins and gave its backing to the little laptops.

Intel's support for low-cost laptops is ready to shift into overdrive. The company's upcoming line of Atom processors, relatively inexpensive chips that consume little power, will show up during the third quarter in small laptops -- priced from US$250 to $300 -- that will be aimed at users in developed markets and heavily promoted by the chip maker. Intel executives want these laptops to be cheap enough that US and European consumers don't think twice about buying them as a second computer. Most are planned to ship with either Linux or Windows XP, even though they will arrive after Microsoft's June 30 deadline has passed.

Windows Vista isn't a viable option in this product segment: It's too expensive and does not work on the stripped-down hardware configurations required to keep prices low.

"At the low end, Vista's hardware footprint is too large," said Tom Rampone, an Intel vice president and general manager of the company's Channel Platforms Group, noting that some low-cost laptops, such as Intel's Classmate PC, have just 2GB of solid-state storage instead of higher-capacity, more costly hard disks.

That small amount of storage rules out the use of Windows Vista on these machines, even Vista Starter, the stripped-down, low-cost version intended for sale only in developing countries. If Microsoft declines to make Windows XP available for low-cost laptops, that could guarantee that Linux -- as the only realistic alternative -- would be left to dominate this segment of the market.

"They're not going to sit by and let that happen," said Bryan Ma, director of personal systems research at IDC Asia-Pacific.

Microsoft officials say they are keeping an eye on the market, and the company's public relations agency confirmed that Microsoft is continuing to talk with OEM partners about low-cost computers. In the end, Microsoft may have little choice but to extend the availability of new Windows XP licenses beyond June 30 if it wants to tap this market and prevent Linux from making further inroads.

Join the PC World newsletter!

Error: Please check your email address.

Our Back to Business guide highlights the best products for you to boost your productivity at home, on the road, at the office, or in the classroom.

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Agam Shah and Sumner Lemon

IDG News Service
Show Comments

Most Popular Reviews

Latest News Articles

Resources

PCW Evaluation Team

Azadeh Williams

HP OfficeJet Pro 8730

A smarter way to print for busy small business owners, combining speedy printing with scanning and copying, making it easier to produce high quality documents and images at a touch of a button.

Andrew Grant

HP OfficeJet Pro 8730

I've had a multifunction printer in the office going on 10 years now. It was a neat bit of kit back in the day -- print, copy, scan, fax -- when printing over WiFi felt a bit like magic. It’s seen better days though and an upgrade’s well overdue. This HP OfficeJet Pro 8730 looks like it ticks all the same boxes: print, copy, scan, and fax. (Really? Does anyone fax anything any more? I guess it's good to know the facility’s there, just in case.) Printing over WiFi is more-or- less standard these days.

Ed Dawson

HP OfficeJet Pro 8730

As a freelance writer who is always on the go, I like my technology to be both efficient and effective so I can do my job well. The HP OfficeJet Pro 8730 Inkjet Printer ticks all the boxes in terms of form factor, performance and user interface.

Michael Hargreaves

Windows 10 for Business / Dell XPS 13

I’d happily recommend this touchscreen laptop and Windows 10 as a great way to get serious work done at a desk or on the road.

Aysha Strobbe

Windows 10 / HP Spectre x360

Ultimately, I think the Windows 10 environment is excellent for me as it caters for so many different uses. The inclusion of the Xbox app is also great for when you need some downtime too!

Mark Escubio

Windows 10 / Lenovo Yoga 910

For me, the Xbox Play Anywhere is a great new feature as it allows you to play your current Xbox games with higher resolutions and better graphics without forking out extra cash for another copy. Although available titles are still scarce, but I’m sure it will grow in time.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?