How much will Microsoft charge for Windows 7 on netbooks?

A lot of discussion has bounced around since Microsoft showed Windows 7 running on a netbook at the PDC recently.  This was an obvious attempt to show us all that Windows 7 is less resource hungry than Vista and could easily power netbooks.  This is great news and some folks much smarter than I are analyzing what the bursting netbook market could do to Microsoft’s bottom line if Windows 7 becomes the de facto standard OS for the little notebooks.

This should be a genuine concern to Microsoft because the netbook market is getting bigger all the time and that growth is expected to continue.  The impact on the bottom line in Redmond will be traced back to how much they will charge OEMs for netbook licenses. Mary Jo Foley has some interesting thoughts on this subject and she is correct in her statement that OEMs will not be happy if the Windows 7 license fee is a large percentage of the cost of a netbook.  MS can get away with charging a high fee for Vista to OEMs but not for netbooks that typically cost $400 or less.  Part of the growth of XP-based netbooks is no doubt due to the low licensing fee that MS is charging OEMs.  While no one knows exactly how much (or little) that fee is I have my own guess that it’s only $20.

Cimg0928How did I reach the $20 figure?  For the recently announced Mini 1000 netbook by HP they quote $379 for the model running Linux and $399 for the WinXP version.  The OS is the only difference between the two models so I’m guessing that HP is simply passing the license fee on to the consumer.  That would fit into the overall scheme of things as it would put the OS at around 5% of the retail price of most netbooks which sounds about right to me.  Do you think MS will only charge OEMs $20 for their brand new Windows 7 when it ships?  They can’t, not without hammering their projections and bottom line.  So it’s going to get pretty interesting next year when Windows 7 hits.  Perhaps Linux will end up being the OS of choice on netbooks if the Win 7 fee is too high.  One thing is almost certain, MS will not allow WinXP to be sold on netbooks once Win 7 goes live.  They can’t.

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