Cheap PCs are not Microsoft's friend

Three interesting trends in the world of netbooks. First, they are estimated to account for about 8% of worldwide PC demand, climbing to 12% over the next four years. That's an astounding number. Second, 30% of netbooks are believed to be running some version of Linux, which equates to 2.4% of the world market. Another astounding number. Third, the remainder only have the capability to run a stripped down version of Vista, which will have a negative impact on Microsoft's revenue.

"It’s pretty clear that netbook sales are cannibalizing sales of higher priced versions of Windows," said Matt Rosoff, an analyst at Seattle-based research firm Directions on Microsoft. "This is clearly a trend Microsoft is concerned about."

I don't know where Mr. Rosoff gets this information, but it's hard to argue with his conclusion.

Consider who would be the primary target market for these devises. Students. Middle-market and down-market consumers. Bargain hunters. In current conditions, I believe that netbooks will make market share gains even greater than the predictions indicated above. On the other side of this recession, Microsoft may find it difficult to win back the consumers that have explored beyond the fence. Further, it will be imperative for organizations to build customer-facing applications to accommodate Linux users.

More information from the Wall Street Journal: Cheap PCs Weigh on Microsoft