Vista Price Slashed

Microsoft has announced surprise price cuts to its Windows Vista operating system, in some cases slashing the cost almost by half. In the United States, the price will drop from $399 to $319 for the hi-spec Ultimate edition. The standard Home edition price is falling from $259 to $219. The price cuts vary in other countries, and the new prices will take effect once Service Pack 1, the first major update to Vista, is released.

For emerging markets such as Russia and India, Microsoft is dropping its upgrade option, by which existing Windows users can get Vista for a reduced price. They've found few customers already had Windows -- or at least, few had legal copies. Instead, they'll now offer the Home edition outright for the upgrade price.

The price drops follow sluggish sales, with only 10% of PCs currently running Vista. Though 100 million copies of Vista have been sold, that's still considered a disappointment, and Microsoft is now going to continue selling Windows XP until June.

It's possible the price cut is related to news that the total amount spent on software in America dropped by 30% in January, though Microsoft says that's likely due to stores discounting for post-Christmas clearance sales. (Source: reuters.com)

Analysts say the big problem with Microsoft's tactics is that many users are happy with Windows XP, and price cuts won't tempt them to switch to Vista until they see it as absolutely necessary. That might not happen until new software is exclusively compatible with Vista.

The announcement only covers standalone boxed versions of Vista rather than copies which come pre-installed on computers (and make up around 80% of Vista revenue). Microsoft is keeping quiet about whether they'll cut the fee it charges computer manufacturers to include Vista. (Source: news.com)

In theory, the price drops should pay off for Microsoft; in trials they found it boosted sales enough to increase overall revenue. However, a mediocre reception among those who've used Vista means it could take more than lower prices to tempt many users to make the switch.

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