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Special Report: Those XP prices in full

'It's macroeconomics, stupid' — XP pricing in EU

Microsoft has handed down the pricing for its Windows XP operating system and, as usual, Europeans are going to pay more than almost anywhere else.

Microsoft says Windows XP Home Edition will be available in an upgrade version for £89.99 and in a standard version for £179.99. Windows XP Professional will be available in an upgrade version for £169.99 and in a standard version for £259.99. All prices include VAT.

US prices are roughly £137 without tax. Stick 17.5 percent on this for VAT and you arrive at around £161. When asked why Europeans had to pay more than Americans, Microsoft pointed to economies of scale.

"You cannot compare US with European prices," said Neil Laver, one of Windows' product marketing managers in the UK. "It's intrinsically more expensive than the US market." Laver pointed to how Microsoft had to support different countries in Europe, different languages — 22 different regions instead of one big one.

There's much truth in this view. It does cost more to produce and sell goods in Europe. This isn't a truly open market. Perhaps it would even be possible to justify an uplift of 10 percent.

But the overwhelming majority of copies of XP will be sold on new PCs via OEMs (original equipment manufacturers) — PC makers. According to Laver, companies such as Dell and so on buy their copies of XP at US cost price. This messes up the economies of scale argument.

Of course this is educated guesswork, because Microsoft won't say how many units in each market it sells or give an exact split between copies sold over the counter and via PC makers.

"I'm not going to prove any economies of scale to you," said Laver. Units sold in US? No. Units sold to Joe Bloggs as opposed to those sold to PC Maker Plc? No.

But Laver gave a little after PC Advisor agreed to think about the concept of VAT.

"I can give you an indicator [of that split]," said Laver. "For corporates it's predominantly licence purchases, and for consumers the majority is preinstalled." In other words, it's a safe bet that a sizeable majority of the operating systems shipped are sold on top of new PCs. "Most people enjoy global pricing in that regard," added Laver. "The cheapest place to buy software is preinstalled."

But if most copies of XP sold in the UK will be bought at the global price, how can Microsoft justify adding 10 percent to a small proportion of them? Answers on the back of an old copy of Windows 3.1 to PC Advisor's forum, at this address.


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