ITworld.com - The low-cost laptop offer Microsoft = can't refuse

That leaves Microsoft executives with = a=20 choice: Do they extend the availability = of=20 Windows XP for low-cost laptops, or = possibly=20 concede this nascent market to Linux? =

The poster child for the low-cost = laptop is=20 Asustek Computer's US$249 Eee PC, which = hit the=20 market in October last year and runs the = Xandros=20 distribution of Linux. Consumers in the = U.S. and=20 elsewhere embraced the laptop, which = uses a=20 version of Intel's Celeron M processor, = for its=20 small size and ability to perform basic = tasks=20 like Web surfing and e-mail. It became = something=20 of an overnight sensation, and that = success=20 caught the attention of other hardware = makers,=20 including top-tier PC vendors.

The Eee PC's success wasn't possible = without=20 Intel's support. The chip maker was = initially=20 hesitant to embrace Asustek's push into = low-cost=20 laptops for fear it would drive down = margins for=20 its mobile processors if users opted to = buy=20 low-cost laptops instead of more = powerful -- and=20 more expensive -- models. But Intel = eventually=20 decided that the opportunity to expand = the size=20 of the overall laptop market outweighed = the=20 risks of lower profit margins, and gave = its=20 backing to the little laptops.

Intel's support for low-cost laptops = is ready=20 to shift into overdrive. The company's = upcoming=20 line of Atom processors, relatively = inexpensive=20 chips that consume little power, will = show up=20 during the third quarter in small = laptops --=20 priced from $250 to $300 -- that will be = aimed=20 at users in developed markets and = heavily=20 promoted by the chip maker. Intel = executives=20 want these laptops to be cheap enough = that U.S.=20 and European consumers don't think twice = about=20 buying them as a second computer. Most = are=20 planned to ship with either Linux or = Windows XP,=20 even though they will arrive after = Microsoft's=20 June 30 deadline has passed.

Windows Vista isn't a viable option = in this=20 product segment: It's too expensive and = does not=20 work on the stripped-down hardware=20 configurations required to keep prices = low.

"At the low end, Vista's hardware = footprint=20 is too large," said Tom Rampone, an = Intel vice=20 president and general manager of the = company's=20 Channel Platforms Group, noting that = some=20 low-cost laptops, such as Intel's Classmate PC, have = just 2G=20 bytes of solid-state storage instead of=20 higher-capacity, more costly hard = disks.

That small amount of storage rules = out the=20 use of Windows Vista on these machines. = Even=20 Vista Starter, the stripped-down, = low-cost=20 version intended for sale only in = developing=20 countries, Moblin.org, that = provides=20 developers with resources to develop = mobile=20 versions of Linux, including efforts to = improve=20 power management and develop a = Mozilla-based=20 browser that relies on a touch = interface.

Much of this work, including = Canonical's Ubuntu Mobile = Edition, will=20 run on laptops and desktops, as well as=20 MIDs.

In addition to its large footprint, = Vista may=20 not be a suitable option for low-cost = laptops=20 because of its price, according to Navin = Shenoy,=20 general manager of Intel's Asia-Pacific=20 operations. "I don't think you'll see a = lot of=20 Vista in this space for cost reasons," = he said=20 in a recent interview, noting that 25 = low-cost=20 laptops based on Atom are being = developed by=20 various companies.

PC makers are also saying that Vista = is not a=20 good option for the new class of = products.=20 During a recent press conference, = Asustek=20 executives predicted that of the 5 = million Eee=20 PCs it expects to sell this year, = laptops=20 running Windows XP Home edition will = outsell=20 their Linux-based counterparts by a = ratio of 3=20 to 2.

While Linux is generally the = preferred OS for=20 low-cost PC maker Everex, the company = has sold=20 low-cost laptops with Windows XP in = developing=20 countries. Vista isn't an option since = Everex's=20 Cloudbook laptop doesn't meet the = minimum=20 hardware requirements prescribed by = Microsoft=20 for Vista.

"Even 512M bytes of RAM with [Vista] = Home=20 Basic, it's a slow machine -- = underpowered and=20 underperforming," said Paul Kim, = director of=20 marketing at Everex, adding that when it = comes=20 to low-cost computers, Windows XP "still = seems=20 to be a better path at this point."

Industry analyst Roger Kay, founder = and=20 president of Endpoint Technologies = Associates,=20 agreed that the cost of licensing = Windows Vista=20 will prevent Atom-based PCs from = reaching=20 Intel's target price of $199 to $250. = "Given the=20 cost of the Windows license, which = hasn't=20 decreased anything like the rate that = hardware=20 has ... that makes for a greater = incentive for=20 customers and [PC makers] to look for an = alternative," he said, calling Linux the = best=20 option.

If Microsoft makes an exception to = its plans=20 and offers Windows XP licenses for = low-cost=20 computers in the U.S. and other = developed=20 countries after June 30, the software = maker may=20 not have to worry about eroding sales of = Vista.=20 Intel is working hard to segment = low-cost=20 laptops and mainstream laptops to = prevent any=20 overlap in sales.

To do this, Intel has set guidelines = for=20 low-cost laptops based on Atom, = restricting the=20 features they offer. For example, Intel = has told=20 hardware makers they can only use the = chips in=20 laptops with smaller screens, preventing = vendors=20 from producing a 14-inch laptop based on = the=20 Atom. The goal is to protect the = mainstream=20 laptop segment for more powerful and = costly=20 processors, like the Core 2 Duo, while = catering=20 to consumer demand for smaller, = inexpensive=20 laptops that complement -- but do not = replace --=20 their main computers.

Perhaps Microsoft will realize that = if Intel=20 is comfortable segmenting the market in = this=20 way, they can be comfortable, too. They = may not=20 have another = choice.


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The low-cost laptop offer Microsoft = can't=20 refuse