Microsoft Cuts Vista Prices

SAN FRANCISCO -- Microsoft(MSFT) will lower the price on retail versions of its latest Windows operating system, the company disclosed Friday.

The beneficiary of most of the Vista price reductions, which will range from 20% to 48% but only on boxed versions sold in stores, will be emerging markets, where adoption of open-source Linux systems has been strongest.

The move comes amid reports that Microsoft had lowered the technical requirements of computers capable of running Vista in order to assist chipmaker Intel(INTC) to meet its quarterly earnings forecast.

Many PCs initially shipped in late 2006 as "Vista capable" may not have been powerful enough to operate the new system, leading to numerous complaints about the performance of Vista. The software also suffered initially from a lack of driver support -- small software extensions that enable other devices to work the operating system.

In developed markets, there will be some price reduction to upgrades of versions sold in 2007, according to Brad Brooks, vice president of Windows consumer product marketing.

In emerging markets, price changes are attempting to spur users to upgrade from Windows XP, according to Brooks.

The move will support Microsoft's push to curb piracy of its software in emerging markets, where installation of valid versions of the Windows operating system is as low as 40% of PCs shipped, the company has said in the past.

The overall rate of software piracy in China, for example, has dropped to 82% in the past few years, from 92% previously, according to a 2007 report from IDC and the Business Software Alliance.

Microsoft has sold more than 100 million versions of Vista since its launch in early 2007. Adoption of premium versions by American consumers has been strong, driving earnings growth in the past two quarters, although many businesses have not upgraded from XP, presumably because they were waiting for the recent release of the first full package of patches and software tweaks.

Microsoft's client software business, which includes Vista sales, took in $4.3 billion during the quarter ended in December.

Shares of Microsoft were down 22 cents, or 0.8%, to $27.71 in recent trading.

>To order reprints of this article, click here: Reprints