Shares of Microsoft Corp. (MSFT) fell a day after the software giant said a price cut will be offered as part of its impending release of a new version of Windows.
Microsoft said Thursday it will cut prices for the consumer version of Windows 7, scheduled for release in October, a move that will have the company deferring some $300 million in revenue in its fiscal fourth quarter ending in June.
The price cut is seen as a positive step toward enticing users to upgrade to Windows 7 in broader numbers, following the relatively poor reception afforded to its predecessor, Vista. Consumers who buy a personal computer between Friday and the official release of Windows 7 will receive a free upgrade to the new product, and prices for the Home Premium upgrade version of Windows will be cut by about 10% in the United States.
FBR Capital Markets analyst David Hilal told clients in a note Friday the Windows 7 pricing strategy should help prevent a “stalling” of personal-computer purchases during the back-to-school shopping season.
“The price breaks are a good strategic move,” Hilal wrote, given that Microsoft may be feeling some competitive pressure from Apple Inc. (AAPL), open-source Linux operating systems, and even Google Inc.’s (GOOG) Android operating system.
While Microsoft’s Windows is the dominant operating system currently used in increasingly popular and affordable “netbook” computers, Google’s technology is expected to become available in a wide variety of netbooks in the future.
Citigroup analyst Brent Thill told clients Friday that because retail versions of Windows account for a relatively small portion of overall sales, the Windows 7 price cuts are unlikely to have much of an impact on Microsoft’s finances.
The rest of the article can be found at the Wall Street Journal Online.