Microsoft tries to hold its own with netbooks

Makers of netbooks, the tiny PCs that sell for as little at $300, need inexpensive operating systems to keep their retail prices down. That means they often turn to OS products like open-source Linux.

Some of the companies that build and market netbooks, including Hewlett-Packard (HPQ), are considering using Google's (GOOG) Android software.

All of this talk about alternative operating systems is giving Microsoft (MSFT) heartburn because netbooks sales are rising sharply. The world's largest software company has come to a fork in the road with its new Windows 7 products.

Does it offer the product at a low price to get it onto netbooks? Will this offend customers who pay a higher price on regular PCs?

According toThe Wall Street Journal, "Microsoft Corp. is taking an unusual approach with its new Windows 7 operating system: Customers buying many of the least-expensive laptops with the software are likely to be limited to running three applications at a time and miss out on other key features, or pay for an upgrade."

The move to offer a "dumbed-down" version of Windows is brilliant. Most PC users are still used to using Windows and learning a new operating system may put some netbook buyers off. Microsoft is, to a large extent, helping netbook hardware makers by allowing them to offer the product that buyers are most likely to want at a price point that will not bump up costs.

The Microsoft action may be defensive, but it also may work.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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