Effective with release of the boxed edition of Vista Service Pack 1, expected to be available at stores within the next several weeks, the price for a full, retail copy of Windows Vista Ultimate in the U.S. has been reduced 20% to $320 from $400. The upgrade version of Ultimate has been cut to $220 from $260. The full version of Vista Home Premium falls 19% to $130 from $160, according to Microsoft.
Computer users in Europe and emerging markets will see even bigger price cuts. In the U.K., the price for the full version of Vista Home Premium drops 44% to 131.92 pounds from 233.60 pounds. The list price for Home Premium in South Africa will fall 41% to about Rand 1700.
Microsoft said Vista price cuts in emerging markets -- where the company faces the most competition from open source software -- will be as high as 48% in some countries.
In lowering its prices for boxed copies of Vista, Microsoft is hoping to entice the many thousands of everyday computer users whose systems still run Windows XP to upgrade their machines to its latest OS.
The bulk of operating system sales are driven by new PC shipments. Standalone copies "have been primarily from customers who value being early adopters and those building their own machines," said Microsoft Windows consumer marketing VP Brad Brooks, in a statement.
"We've observed market behavior, however, that suggests an opportunity to expand Windows standalone sales to other segments of the consumer market," Brooks added.
Microsoft's dominance of the computer operating system market has declined significantly in recent years as viable alternatives to Windows emerge. Apple, for instance, recently introduced its slick, OS X 10.5 "Leopard" operating system. Leopard features numerous graphical enhancements that counter Vista's glassy, 3-D Aero interface.
Additionally, the open source Linux OS is going mainstream as distributors such as Ubuntu add features designed to make it more user-friendly. Wal-Mart recently began selling Everex's Linux-based gPC for less than $200.
It's all taking a toll on Windows' market share.
In 2007, only about 39% of new computers shipped with Vista on board, compared with the 67% of the new computer market captured by Windows XP in its first full year of availability in 2002, based on data from Microsoft and Gartner.
In spurning Vista, some PC buyers have cited concerns about its cost, resource requirements, and incompatibility with their existing applications. Indeed, the Ultimate version of Vista, not including a computer, still costs more than the Everex gPC even when Friday's announced price cuts are factored in.