Is Microsoft pricing itself out of the consumer market?

By Hamish Taylor
Thursday, 29 October 2009 09:54

Opinion and Analysis

Late October 2009 is proving to be an interesting time in the world of computer operating systems. Within the space of eight days we have seen Apple dramatically dropping their prices, Microsoft releasing Windows 7 and on Thursday 29 October Canonical will release Ubuntu "Karmic Koala" 9.10.

Of course, most people would argue that with the greatest market share, Microsoft's release of Windows 7 is the most significant of these events. However, consumer sentiment has been mixed.

Some consumers have reacted angrily at the prices set by Microsoft for Windows 7. Many negative comments have highlighted a perception of "price gouging" of Australians due to a significant cost differences between the list prices for US and Australia, even allowing for currency exchange rate differences.

In Australia, at the time of publishing, the official price for Windows 7 Home Premium Upgrade is $AUD199. There is some discounting and the cheapest price I was able to find was $AUD168, with the Premium versions costing significantly more.

The official US price for Windows 7 Home Premium Upgrade is $119.99, which is $AUD133.77 (using xe.com's mid-market rates sourced on 29 October 2009), making the Australian version more expensive than the US version by $AUD34.23 to discounted prices and $AUD65.23 to the official list price.

In contrast, mid-year Apple released the new version of OS X, "Snow Leopard", with an upgrade price tag of $AUD39. Of course, Canonical will release Ubuntu "Karmic Koala" 9.10 for no cost.

Apple's recent price drops puts its products firmly into the market typically occupied by Microsoft. For a range of other reasons, consumers are beginning to look seriously at Apple's products, citing that not having to worry about viruses as being a major reason for considering Apple. Many have been burnt by Vista and are reluctant to automatically upgrade to Windows 7.

One client I am currently assisting, works extensively in Asia and has repeatedly been exposed to viruses which transfer via USB keys and camera cards. Many of these evolve so quickly that they don't get picked up by up-to-date anti-virus software. My client's Windows XP laptop barely functions, even after repeated cleaning and to truly fix it would require a costly reload of Windows with all applications and settings. Providing that she'll be able to accomplish all of her work, she will be buying a Mac as soon as she can.

Whilst this might be anecdotal evidence, a few years ago Windows would have been the automatic purchase. New hardware would have been purchased with the current version of Windows pre-loaded.

In the past with the release of a new operating system, we would have seen a retail frenzy of consumers desperate to upgrade to the latest version. In 2009 with the release of Windows 7, this has been conspicuously absent. Microsoft's ongoing market share now looks a lot less certain.