Vista takes a plunge!

The boss is retiring, Crazy Stevie's in charge, and our prices are INSA-A-A-A-NE!!

By JOHN MURRELL

In the year since its introduction, Microsoft has moved more than 100 million copies of Windows Vista into the market, and just on the numbers, you'd have to call that a success. But the vast majority of those sales have gone to a captive audience, the folks buying new PCs with Vista preinstalled. Meanwhile, among the existing base of Windows XP users, there's been a broad reluctance to brave the upgrade path (see "No chance we could relabel it Windows Classic and find a quiet exit strategy, I suppose"). The hardware demands, the performance issues, the incompatibilities with peripherals, the sour reviews all contributed to giving XP users a new appreciation for the old OS. But of all the things holding back upgrade sales, price seemed to be the least of them. It was, however, the easiest to fix.

Late Thursday, Microsoft announced it was cutting the retail prices on the upgrade versions of Vista Home Premium and Ultimate editions (the Basic price holds steady). The Premium edition drops from $159 to $129, and Ultimate goes from $299 down to $219. What does not change are the prices Microsoft charges computer makers (another captive audience), so most consumers won't see any benefit. All of which left analysts a little baffled, both at the markdown itself ("I can't remember a big price cut like this," said Chris Swenson of the NPD Group. "It's very unheard of.") and its focus on upgraders ("It's sort of an odd move," said Gartner's Michael Silver).

But with the new prices coinciding with Vista's first major update, Microsoft is seeing an opportunity, however small. Said Brad Brooks, corporate vice president for Windows Consumer Product Marketing, "Over the past year, we conducted promotions in several different markets combining various marketing tactics with lower price points on different stand-alone versions of Windows Vista. While the promotions varied region to region, one constant emerged - an increase in demand among consumers that went beyond tech enthusiasts and build-it-yourself types. The success of these promotions has inspired us to make some broader changes to our pricing structures, to reach a broader range of consumers worldwide." Well, we'll see, but in any case, it's good to hear that there have been no major changes in the traditional relationship between price and demand.