Microsoft Cuts Vista Prices to Urge Upgrades

SEATTLE (Reuters)- Microsoft Corp said on Thursday it plans to cut prices of its WindowsVista operating system sold at retail outlets in a move aimed atpushing customers to switch to the newest version of Windows.

The world’s largest software maker said it plans to lower retailprices for Vista in 70 countries later this year in tandem with theshipment of the first major update to Vista, known as Service Pack 1(SP1).

Packaged versions of Windows Vista sold at stores and on the Webaccount for less than 10 percent of all licenses of the dominantWindows operating system that sits on more than 90 percent of theworld’s personal computers.

Most consumers opt to buy a new PC, which comes preloaded with the latest version of Windows.

"We anticipate these changed will provide greater opportunities …to sell more stand-alone copies of Windows," said Brad Brooks, aMicrosoft corporate vice president.

In the United States, Microsoft will reduce prices for Windows VistaUltimate, the company’s top-end operating system, to $319 from $399 forthe full version and cut the price for an "upgrade" version to $219from $259 for consumers who already run Windows XP or another editionof Vista.

It also cut prices for upgrade versions of Vista Home Premium, itsmainstream product, to $129 from $159. The price cuts vary by country.

In emerging markets, Microsoft will stop selling "upgrade" versionsof Vista, because, for many customers, it will be the first purchase ofa genuine copy of Windows. The company will instead sell Vista HomePremium and Home Basic, a stripped-down version, at the upgrade prices.

Microsoft has sold more than 100 million licenses of Vista since itsJanuary 2007 release and its adoption has underpinned strong earningsresults at the company in recent quarters.

Nonetheless, some consumers have raised issues with Vista’sperformance, stringent hardware requirement and lack of support forother software and devices like printers. Microsoft said it wouldcontinue to sell Windows XP until June 2008, delaying a scheduledtransition to Vista.

Brooks, who oversees consumer marketing of Vista, said he isconfident the company can bring in enough new customers to offset therevenue declines from lowering prices after seeing the results of arecent three-month promotional trial of lower Vista prices.

The announcement comes on the heels of sales data that showed a 30percent drop in money spent for software at U.S. retailers in January,according to market research firm NPD.

Microsoft said the announcement is unrelated to the sales data,which the company said could be a result of inventory build-up afterthe holiday shopping season.

(Reporting by Daisuke Wakabayashi, editing by Leslie Gevirtz)