Analyst differs, saying it has more to do with improving profit margins in developed countries

Computerworld – While it plans to focus on marketing two versions of Windows 7, Microsoft Corp. will offer six editions of its next operating system to better satisfy PC makers and end users, an executive said Tuesday.

“We did a lot of research and talked to a lot of [hardware] partners and customers,” Mike Ybarra, general manager for Windows, told Computerworld following the versions announcement today.

“Our biggest challenge is that we have over 1 billion customers,” Ybarra said. “It’s hard to satisfy all of them [with a single version]. There are vocal customers who want every feature, and more regular consumers who say ‘I want a version that can grow with me.'”

Microsoft said today that it will aim Windows 7 Home Premium at the majority of consumers and Windows 7 Professional at businesses. That harks back to Windows XP, which had two main SKUs: Home and Professional.

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However, Microsoft will maintain all of the four other versions it offered with Vista, including the controversial Home Basic, the Starter Edition that was until now restricted to developing countries, Enterprise and Ultimate. That “SKU proliferation” confused many consumers and corporate customers.

Meanwhile, Apple Inc. releases a single version of Mac OS X with every new release. It does have far fewer users than Windows, with some estimates claiming between 30 million to 50 million users worldwide today.

Matt Rosoff, an analyst at the independent firm Directions on Microsoft, said that keeping the number of versions high is all part of Microsoft’s attempt to segment the market and “maintain the average-price-per-unit of Windows sales in developed countries to counteract the effects of price pressure in developing countries, where most growth is happening.”

Rosoff thinks Microsoft’s rejiggered lineup is “simpler” for consumers, but remains too complicated for businesses, which will have to “check the feature list carefully” in order to choose between Professional, Enterprise and Ultimate.

Microsoft did consider cutting Ultimate, a pricy, fully loaded version that in Windows Vista was aimed at gamers and enthusiasts.

“We’re keeping it because a lot of top [PC makers] wanted it in order to let them differentiate their own hardware,” Ybarra said.

Windows 7 Ultimate won’t have any unique multimedia features, but it will share the same advanced networking and security features as Windows 7 Enterprise, which is available to large corporations through volume licensing, Ybarra said.

Rosoff expects Ultimate to be embraced by businesses rather than enthusiasts, because they will seek to avoid locking themselves into a multiyear license agreement as is required by the Enterprise version.

Rather than cutting Home Basic altogether, Microsoft chose to sell it only in developing markets, where very cheap PCs are in demand, Ybarra said. “[PC makers] need to hit multiple price points: good, better and best,” he said.

Windows 7 Starter Edition is even more limited than Home Basic, allowing users to open only a maximum of three applications at any given time. “We felt that was the right way to go,” Ybarra said, as this version will be aimed at new PC users.

While Microsoft is making Windows 7 Starter Edition available for netbooks worldwide, Ybarra expects the majority of PC makers to pre-install Windows 7 Home Premium anyway.

Rosoff agrees, saying that PCs shipped with Windows 7 Home Premium will likely cost about $50 more than those with Starter.

“On a $500 PC, I don’t think customers will balk at paying an extra $50 for not having limitations such as the ability to open only three apps simultaneously,” Rosoff said. “On a $200 PC (should such a thing ever emerge), that $50 might be a harder sell,” Rosoff said in an e-mail.

Ybarra declined to disclose prices for any of the versions. He also declined to say how many “N” versions of Windows 7, which lack Windows Media Player as per European Union rules, Microsoft will release in Europe.

He promised that users would be able to perform Windows Anytime Upgrades even more quickly with Windows 7 than with Vista. In Vista, users would pay at Microsoft’s Web site to get a license key and then re-insert their Vista DVD to physically install the upgrade on the hard drive.

With Windows 7, all versions are already installed on the user’s PC hard drive, meaning he pays and then “simply unlocks the features,” Ybarra said. Total upgrade time should be between seven and 10 minutes, he added.

Except for Starter, which will come in 32-bit only, all flavors of Windows 7 will ship in both 32-bit and 64-bit editions, Ybarra said.

He added that Microsoft has no plans to release any more versions of Windows 7 after its initial release, as occurred with XP.

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