Ballmer confirms Windows 7 Starter restrictions for netbooks

'Super-small screen' and 'certain processor' limits aim to boost revenues, says CEO

Microsoft CEO Steve Ballmer recently confirmed that the company will limit Windows 7 Starter, the edition expected to end up on netbooks, to systems that sport small screens and low-powered processors.

During Microsoft's annual financial analyst day July 30, Ballmer got more specific than other executives in describing the limitations computer makers must abide by if they're to install Starter on their machines. Starter is the least feature-rich edition of the operating system available worldwide, and will not be sold direct to consumers or businesses. It will be available only to OEMs, or "original equipment manufacturers," such as Acer, ASUS, Dell, Hewlett-Packard and Toshiba.

"Our license tells you what a netbook is," said Ballmer at the Microsoft-hosted day with Wall Street analysts. "Our license says it's got to have a super-small screen, which means it probably has a super-small keyboard, and it has to have a certain processor and blah, blah, blah, blah, blah."

Although other Microsoft executives earlier this year said that the company would place restrictions on the kinds of processors and screen resolutions supported by Starter, Ballmer is the highest computer official yet to spell out Starter's limitations, if only in the broadest terms.

Last May, the Malaysian Web site TechARP.com, which regularly leaks information provided to computer makers by Microsoft, reported that the company would restrict Starter to specific netbook configurations. According to TechARP, Microsoft will only sell Starter to OEMs for use on netbooks that have a 10.2-in. or smaller screen, no more than 1GB of memory, a hard disk drive of 250GB or less (or a solid-state drive no larger than 64GB) and a single-core processor no faster than 2GHz.

Ballmer was frank with analysts about Microsoft's rationale for setting Starter's limitations. "We want people to be able to get the advantages of lightweight performance and be able to spend more money with us, with Intel, with HP, with Dell and with many, many others," he said.

"With today's netbooks, we sell you XP at a price," Ballmer continued. "When we launch Windows 7, an OEM can put XP on the machine at one price, Windows 7 Starter Edition at a higher price, Windows 7 Home Edition at a higher price, and Windows 7 Professional at a higher price."

Microsoft has not disclosed pricing for Starter, since the edition will be sold only in volume to OEMs, and will not be available to end users at retail. However, Ballmer made it plain that Microsoft hopes to coax users into purchasing PCs with higher-priced versions of Windows 7. "It's not just what are our prices -- that's partly in here -- but it's also a function of how well do we do getting, in any segment, people to buy the more expensive offering," he told analysts.

"They're trying to force people into higher-end SKUs," said Allan Krans, an analyst with Technology Business Research. "Selling XP at a low price to OEMs hurt them financially, and they're trying to figure out a way to stem that."

Last month, Microsoft said revenues for the Windows client division were down 29 per cent year over year for the company's fiscal fourth quarter, which ended June 30. Microsoft blamed the fall-off on the increased sales of netbooks and a global slow-down of PC purchases.

Ballmer acknowledged that Microsoft made a mistake pricing licenses of Windows XP Home that it's been selling only to netbook makers since April 2008. "[Windows revenues are] down primarily because we did a program this year to cut prices in emerging markets with a theory that the lower price would lead to higher attach and higher total revenue," Ballmer said.

"The theory was wrong. It's not that it was untested, but it turns out the theory was wrong, and you will see us address the theory in the Windows 7 time frame. We're going to readjust those prices north, so to say, and I think with our Windows 7 SKU lineup, we also have a great chance to do some up-sell ... to Windows 7 Starter, Windows 7 Home...."

"They're trying to rectify the mistake," noted Krans. "But that will be very difficult for them to do. Netbook prices are low already, and adding another $US20 or $US30 for Windows 7 Starter will make it too tight for [OEMs[ to operate."

Microsoft doesn't divulge Windows prices to OEMs, but earlier this year the Wall Street Journal cited sources that claimed the company receives less than $US15 per netbook for Windows XP, considerably less than the estimated $US50 to $US60 it gets for a Vista license.

Krans said higher prices for Windows 7 -- $US30 to $US40 more than XP Home -- would be a tough sell to netbook makers. "OEMs don't have a lot of wiggle room on price, since price points seem to be the most important feature for netbooks," said Krans.

The best Microsoft can hope for is to make a case for more capable, but still-inexpensive laptops that run one of the "premium" editions of Windows 7, like Home Premium or Professional. "Netbooks have their place, but low-end notebooks are a more compelling value," Krans said. "For $US500 or less, low-end notebooks are going to have a much more usable keyboard and a more usable screen. They're better for the OEMs and for Microsoft, because there's more pricing flexibility there than in netbooks to make some sustainable margins."

Microsoft has committed to continue selling Windows XP Home to netbook makers for at least 12 months after the launch of Windows 7, or through October 2010.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags MicrosoftWindows 7steve ballmer

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

Gregg Keizer

Computerworld
Show Comments

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Christopher Low

Brother RJ-4230B

This small mobile printer is exactly what I need for invoicing and other jobs such as sending fellow tradesman details or step-by-step instructions that I can easily print off from my phone or the Web.

Aysha Strobbe

Microsoft Office 365/HP Spectre x360

Microsoft Office continues to make a student’s life that little bit easier by offering reliable, easy to use, time-saving functionality, while continuing to develop new features that further enhance what is already a formidable collection of applications

Michael Hargreaves

Microsoft Office 365/Dell XPS 15 2-in-1

I’d recommend a Dell XPS 15 2-in-1 and the new Windows 10 to anyone who needs to get serious work done (before you kick back on your couch with your favourite Netflix show.)

Maryellen Rose George

Brother PT-P750W

It’s useful for office tasks as well as pragmatic labelling of equipment and storage – just don’t get too excited and label everything in sight!

Cathy Giles

Brother MFC-L8900CDW

The Brother MFC-L8900CDW is an absolute stand out. I struggle to fault it.

Luke Hill

MSI GT75 TITAN

I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?