Going for 2 Billion: Microsoft Dramatically Lowers Prices for Poorest Customers

Microsoft: You've already got a billion users worldwide. What's next? A billion more, of course. Microsoft this morning announced a new initiative that will provide the company's most valuable software to the world's most needy users at almost no cost, in a bid to raise its worldwide user base from one billion to two billion users by 2015.

Microsoft's efforts come under a new program called Microsoft Unlimited Potential (which the cynical might read as "For Microsoft, Unlimited Potential.") But make no mistake: Microsoft is not promoting its efforts as charity. "This is a business, not a philanthropic effort," said Microsoft senior vice president Orlando Ayala.

Under the new program, Microsoft will offer low-income consumers in the US and around the world heavily discounted versions of Windows XP Starter Edition and Office 2007 Home and Student. These programs will be offered for about $3 on PCs that will typically cost $300 or less. (These programs typically cost consumers about $150 in new PC bundles.) To qualify, you must be in the bottom 15 percent of the population, financially. In the US, that equates to annual income under $15,000. Computers sold through this program will typically reach consumers through local, state, or national governments.

With annual sales of $45 billion, Microsoft's low-cost initiative isn't going to affect the bottom line anytime soon. But the company believes the program will pay dividends down the road, as children in emerging countries and poorer families in the US become mainstream technology buyers. Some, however, believe that Microsoft's efforts aren't exactly meeting the most pressing needs of these users. "I haven't seen any evidence that the digital divide is more acute or more consequential than say the nutritional divide, the elementary education divide or the basic health care divide," World Bank economist Aaditya Mattoo told "The New York Times."

In a related announcement, Microsoft revealed that over 2 million customers worldwide have purchased PCs with Windows XP Starter Edition or Windows Vista Starter, its operating systems aimed at emerging markets. Microsoft introduced Windows XP Starter Edition in 2004, and it took two years--in September 2006--for the company to sell 1 million copies. However, in the intervening 6 months, the company has sold 1 million more copies of the system, indicating that sales are accelerating.

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