PC vendors upset with Vista pricing

Microsoft is making it harder for PC manufacturers to sell consumer versions of its forthcoming Windows Vista operating system to businesses, a move which is upsetting some low cost providers. 

PC makers looking to cut prices for business PCs often equip their models with Windows XP Home Edition. The software costs less than Windows XP Pro and does not support some enterprise features such as Active Directory management.

But while the consumer version of XP meets the demands of most small businesses today, they are unlikely to enjoy the same user experience in Windows Vista Basic, according to analysts.

"Vendors like Acer were saying that they can make XP Home Edition work and that this is all users really need and they can save all this money," said Rob Enderle, a senior analyst with the Enderle Group. 

"This has worked reasonably well for a number of vendors, but Microsoft is trying to stop that. They want the business guys to buy the business version."

PC makers pay US$25 to US$50 more for Windows XP Pro than for the consumer version, according to Enderle, who expects a similar difference in the OEM pricing between Vista Basic and Vista Business.

Microsoft is offering three Vista versions for consumers and two for businesses. The Basic version will retail at US$199, with a Premium product priced at US$239. The standard Business version costs US$299.

Computer makers receive discounts for software bundled with new systems.

Windows Vista Basic lacks some of the more appealing features of Windows Vista including the new Aero user interface. Some enterprise software also requires the Business version of Vista to function properly, according to Enderle.

Acer lashed out against Microsoft's Vista pricing last week, accusing the vendor of "knowingly crippling" Windows Vista Basic in an effort to make users buy a more expensive version.

This was driving up Acer's costs, according to the manufacturer, and putting the squeeze on its profit margins.

"Right at the beginning Microsoft started talking about the experience of [Vista Home] Premium Edition [suggesting that] Premium is the real Vista," said Acer senior vice president Jim Wong.

In response to Acer's comments, a Microsoft spokesman told vnunet.com that the company aims Windows Vista Basic at consumers looking to use the Internet, send emails and perform basic text-editing tasks. 

The company insisted that PC manufacturers are "free to make their own determinations about which Windows Vista editions they will offer, and to set the prices they will charge for their PCs".

Enderle was surprised by Acer's complaints. The analyst suggested that, as all PC makers are equally affected when Windows Vista Premium becomes the de facto Vista standard, the pricing of the software will not put Acer at a competitive disadvantage.

Acer is more likely to be upset about losing its ability to discount business PCs by equipping them with a consumer version of Vista, according to Enderle.

"Now that Acer's small business systems have to compete equally with other manufacturers' small business systems, it cannot do the Home Edition swap out," he said.

"There was a loophole that benefited companies like Acer. [Microsoft] closed the loophole to get business products flowing to businesses, and consumer products flowing to consumers."

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