PC maker Acer has accused Microsoft of shipping an inadequate low-end version of the upcoming Vista operating system to force more customers to move to the more expensive Vista Home Premium edition. Acer VP Jim Wong says that Microsoft’s own marketing has undercut Basic, since it will lack the fancy user interface and media capabilities of the other editions. Furthermore, he says that customers won’t pay for the additional cost of Premium.
Is he right? About Microsoft? Probably. Microsoft must walk a fine line between the regulatory agencies, who accuse the software giant of unfair business practices, and Wall Street, which expects the kind of profit growth that can only come with a strong pricing practice at this stage in the company’s history. Better segmenting of the user base is one way to achieve this. The stripped down version offers the most price-conscious users an alternative, with fencing to keep other users on more expensive offerings.
If Microsoft did its homework, Wong is wrong about his assertion that users won’t pay for the features of the Premium offering.
What this interview may be about is bargaining. Acer may want better terms or to try to encourage other manufacturer’s to complain as well and bring prices down. Unlike other players in the tech industry, Microsoft has succeeded in keeping prices steady over time. Certainly, newer offerings have more features, but less powerful players have not been able to hold prices steady even with advancing capability.