Microsoft said on Thursday it plans to slash prices on its Windows Vista operating system sold through retail channels. The company wants consumers to upgrade to the latest version of its flagship product.

The price changes will take effect globally with the retail release of Windows Vista Service Pack 1 later that year. In the U.S., Microsoft will cut the price for Windows Vista Ultimate from $399 to $319 and for an upgrade version from $259 to $219. Vista Home Premium will drop from $159 to $129.

Vista has been on the market for more than a year, with more than 100 million licenses sold in its first year. While Microsoft sees those figures as progress, the company plus sees an opportunity to grow its business even more with some of the new editions, according to Brad Brooks, vice president for Windows consumer product marketing at Microsoft.

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“Today, the huge majority of Windows licenses are sold

with PCs. Retail stand-alone sales, in contrast, have been primarily from customers who value being early adopters and those building their own machines,” Brooks said. “We’ve observed market behavior, however, that suggests an opportunity to expand Windows stand-alone sales to other segments of the consumer market.”

Microsoft has conducted promotions in several markets combining various marketing tactics with lower prices on versions of Vista. One constant emerged — an increase in demand among consumers that went beyond tech enthusiasts and build-it-yourself types. Brooks said these promotions inspired Microsoft to change its pricing structure.

Traditionally, the huge majority of Windows licenses are sold through PC makers, and Brooks said that won’t change. Microsoft is positioning the price reductions as a “great opportunity” for its retail partners to sell more stand-alone copies of Windows, and help grow a “small but urgent part” of its business, he said.

Questioning Microsoft’s Strategy

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