Comment Articles

Is Ballmer's $100 PC possible?

Mike Ricciuti CNET News.com

Published: 12 Nov 2004 15:10 GMT

Microsoft's chief executive, Steve Ballmer, is no stranger to controversy.

This is, after all, the man who once said "to heck with Janet Reno" during the early days of the company's antitrust saga, and who more recently has called Linux a "cancer".

So Ballmer's remark last month that a $100 computer would help alleviate software piracy and spread computing to developing nations seems tame in comparison.

"There needs to be the equivalent of a $100 computer, not just a $400 computer, if this stuff is really going to go down-market in some of these countries," Ballmer told attendees at a conference last month sponsored by Gartner.

But by suggesting that the industry needs to offer a cheaper PC, Ballmer puts himself and his company in an awkward spot: will Microsoft take additional steps toward making low-cost PCs a reality by sacrificing some of its fat profit margins on Windows? Or will the software giant leave it to the hardware makers -- already operating on paper-thin margins -- to give back some green?

Let's take a look at where things stand. Microsoft currently charges PC makers anywhere from $50 to $75 per computer to license Windows, according to analysts' estimates. While Microsoft points out that the price hasn't changed much -- in actual dollars -- in years, hardware costs have been plunging. So the cost of Windows as a percentage of a PC's cost has actually grown significantly.

In recent months, Microsoft has introduced low-cost versions of Windows, called Windows XP Starter Edition, especially for developing countries such as India, Indonesia, Malaysia, Russia and Thailand. Word is that PC makers are paying roughly $36 per copy for the software, which can only be sold on new PCs.

Likewise, while top-shelf chips from AMD and Intel can cost upward of $1,000 each, both companies are working on low-cost chips for developing countries. For instance, AMD's Sempron CPU can be had for as little as $39 when purchased in groups of 1,000.

AMD has even gone so far as to make available a blueprint for how to build a PC for as little as $185. Called the Personal Internet Communicator, the machine is geared toward families that make the equivalent of between $1,000 and $6,000 annually. AMD says that three companies in India and Latin America are already signed up to market versions of the machine. But that system wouldn't include a monitor and would run a variant of Microsoft's Windows CE, not the more capable Windows XP.

Similarly, Intel is investigating ways to make low-cost PCs available in Eastern Europe, India and other developing areas. The company, sources say, has been selling a special low-priced processor-and-motherboard combination as part of a project code-named Shelton. The ultimate goal is to produce a PC for as little as $199.