Microsoft tells OEMs what netbooks are

Microsoft is going to restrict original equipment manufacturers (OEMs) to certain hardware specifications for their netbooks if they want to run Windows 7 Starter - the edition of the new operating system designed for netbooks - Microsoft CEO Steve Ballmer has confirmed.

Previously other Microsoft executives have suggested that there will be restrictions on processors and screen resolutions supported by the Starter edition, but at Microsoft's annual financial analyst day on July 30 Ballmer made the company's intentions clear, according to Computerworld. "Our license tells you what a netbook is," Ballmer revealed. "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."

According to Microsoft Windows 7 Starter edition was created so that Windows 7 can be offered on even the cheapest netbooks, but it lacks many features of other editions of the operating system and will only be sold to OEMs and not retail or business customers. Information on Tech ARP claims that netbooks running Starter editions must have screens smaller than 10.2", contain up to 1 GB of RAM, and use a single core processor up to 2 GHz. The current limitations from Microsoft for netbooks running XP or Vista are that screens cannot exceed 12.1".

The reason behind this move is to try and encourage consumers to spend more to get a better, higher specification computer, which will in turn come with a more expensive edition of Windows. "With today's netbooks, we sell you XP at a price," said Ballmer. "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. [...] 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."

Microsoft partly blamed the shift to netbooks for a recent fall in profits, with the majority of netbooks currently running Windows XP which is sold to OEMs at a lower price than Windows Vista - estimated to be less than $15 per netbook and around a third the price that Windows Vista would be. The creation of an edition of Windows 7 for netbooks, along with these hardware limitations, is hoped to reverse the effect.

Ballmer admitted that Microsoft made a mistake with their current Windows XP pricing and acknowledged that it was to blame for Windows revenues being down. He also said that with Windows 7 they hope to rectify the situation. "[I]t 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...."

Microsoft is to continue selling Windows XP for use on netbooks long after the launch of Windows 7. Whilst consumers may like a newer version of Windows on their netbooks than the significantly dated XP, adding Windows 7 will push prices of what is meant to be a low-end product up even further.

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