Linux, cheap PCs and the effect this will have on Microsoft

Over the weekend a few regulars sent me a link to an article on DesktopLinux.com which looked at the effect that cheap Linux-powered desktop PCs would have on Microsoft.  Should Microsoft fear the cheap PC revolution?  Personally, I don't think so.

First, let's set a framework for the discussion by looking at operating system share trends.  According to data provided by Net Applications, the state of play for November 2007 stood as follows:

• Windows - 92.42%
• Mac - 6.80%
• Linux - 0.57%
• iPhone - 0.09%
• PlayStation - 0.02%
• SunOS - 0.01%
• Other - 0.09%

For November 2006, things stood like this:

• Windows - 94.16%
• Mac - 5.39%
• Linux - 0.37%
• PlayStation - 0.02%
• SunOS - 0.01%
• Other - 0.05%

If we break that down into operating system versions, here's the data for November 2007:

• XP - 78.37%
• Vista - 9.19%
• Mac Intel - 3.59%
• Mac OS - 3.22%
• Win 2K - 2.97%
• Win 98 - 0.76%
• Other - 1.90%

And the data for the November 2006:

• XP - 84.95%
• Vista - 0.11%
• Mac Intel - 1.29%
• Mac OS - 4.10%
• Win 2K - 5.46%
• Win 98 - 1.90%
• Other - 2.19%

The main attraction of cheap hardware with Linux loaded onto it is the cheap hardwareTaking a broad overview you come to the conclusion that apart from the iPhone appearing in the list, not an awful lot has changed in a year.  Taking a closer look at the numbers and you'll see how there's been a slight dip in the numbers of Windows users and a slight gain in the numbers of Mac users.  So, currently the platform shift isn't happening at the low-end of the price spectrum but at the higher end.  So far, there's no evidence to suggest that Microsoft has anything to worry about when it comes to cheap PCs. 

OK, but might this not all change next year as more companies begin offering cheap Linux-based PCs?  I can't see it happening.  First off, margins are tight in the PC business already and pushing a cheap PC, especially when you're at the sub $250 mark, means razor-thin margins.  Low margins means less money to spend on advertising and support.  Ever wonder why big OEMs like Dell don't promote Linux-based systems more than they do?  It's because the margins are already so small that even big companies have to watch how they spend the pennies and focus on high-yield systems because that's where the money is (and partly these same big OEMs are having to watch the pennies because of spending too much time focusing on price and devaluing PCs almost to the point where there wasn't any money in selling them).  The $200 PC isn't going to go away, but don't expect big ad campaigns or heavy promotion either because any company going down that road would be committing suicide.  These budget systems are going to have to sell themselves. 

So where does these cheap PC fit into the equation?  From what I can tell, there are two kinds of people buying cheap PCs - geeks, and geeks buying them for someone else.  Sure, I'm certain that a few have been bought by people who are new to PCs and who've been waiting for the price to come down, but the market in developed countries of people who are new onto the PC ladder is a pretty small one.  The main attraction of cheap hardware with Linux loaded onto it is the cheap hardware. 

All in all, the article is nothing more than deck of cards built on the shaky foundation of wishful thinking with a few guesses thrown in for good measure. 

Thoughts?