Microsoft is an OS player in netbooks only because so many of these devices came with such a poorly realized and supported Linux distro and users felt it “was better the devil they knew than the devil they didn’t.” XP is well past its sell-by date, but Microsoft is forced to keep it alive in order to sell anything at all.

But millions of netbooks running XP will be sold by the time Win7 shows up and by then the users of these devices will expect and demand that the OS they use be as fully functioning as what they can currently get – and not get a hobbled version of a troubled OS.

I read Ed’s article yesterday, and I have to say that given the facts of how it interprets the 3-app count, it doesn’t seem completely unreasonable… especially since you could buy it up front with Starter Edition and use the “Anytime Upgrade” feature to step-up to a more-advanced version later for what I suspect will be considerably less.

Having said that, I understand your points on the business model. The problem is that Microsoft painted themselves in a corner with XP & the netbook craze; they’re now trying to find the most suitable business model that continues their cash stream.

Fact is, Microsoft, Intel and other are terrified the Netbook will drive sales away from more expensive hardware, and so have been talking down the netbook as a real computer. However, instead of dealing with it by stepping up to the plate and delivering good value and an experience people are prepared to pay a premium for, they try and throttle the very bottom end of the market by putting artificial limits in. It’s akin to a mafia racket. And you can bet that the app limit will not be advertised in bold letters on the hardware’s box, but hidden away in the small print.

It will, of course, backfire. No-one will understand the limit, and they’ll blame Microsoft for their frustrations – which will drive adoption of other solutions. Such a shame, because I know from the beta that Windows 7 Ultimate runs REALLY well on a netbook, and could really turn their fortunes around.

Also, I think Vista Home Basic proved that people generally aren’t interested in Microsoft’s reasons for imposing limitations (even if it means the cost of the OS drops) and just expect to be able to do everything.

Anyway if you’re smart enough to apply a hack you’re smart enough to install a pirated W7 Ultimate.

Either way this is probably great news to Intel who keeps insisting that netbooks can’t do anything except the surf the net.

On my tablet [TC1100] I rarely have more than the browser open, so I can see this being acceptable as long as services are not counted.

Furthermore, power users are likely to balk at this idea even more.

Also, the point of a netbook is to have a smaller more portable notebook and make some performance compromises, but to have the full desktop potential. This arbitrary limit goes against that idea. Yes, you don’t get flashy graphics, but you still can run all your apps.

My guess is that this will show up on $300-400 netbooks and the upgrade fee will be $100-200. That cheap netbook you just bought is now quite a bit more expensive not including virus and malware protection (if you don’t go the free route).

To be honest, this would be a gift to apple. If this shows up on $400 netbooks (assuming a $200 upgrade fee), you can be almost sure Apple will release a $700-800 “netbook” with full blown iLife and OSX. Apple can’t compete at $400, but if MS does this, Apple will have commercials saying for the same price why compromise?

This probably also points to the fact that the netbook market is probably not sustainable with razor thin profit margins.