In Malaysia, Microsoft has set the pricing of Starter Edition at 120 ringgits (£16). In contrast, bootleg copies of Windows XP Professional or Home Editions are sold at IT malls in Kuala Lumpur for less than £2.50.
According to Gilliland, PC makers in developing markets are mostly focused on driving hardware sales, not software margins. "They don't really make much profit from the OS component of the PC. If they can sell more PCs to resellers by removing the OS, that's what they are going to do," he said.
To address this issue, he said, Microsoft will have to "create a different sales or go-to-market strategy".
"Their current standard vendor and channel relationships will need to be altered slightly to make this product succeed for them," Gilliland added.
Trial and error
Microsoft recognises the problems with Starter Edition and plans to tailor its distribution and marketing efforts to suit individual countries as part of a 12-month pilot program, a senior company executive told CNETAsia.
"We'll be testing several go-to-market approaches," said Mike Wickstrand, Microsoft's director of Windows product management.
He said Redmond has decided on a "focused" approach in Malaysia by partnering with furniture and electronics megastore Courts Mammoth. On Tuesday, the retail giant announced it will start selling Starter Edition PCs made by local computer manufacturer FTEC in its 20 outlets.
According to Kelvin Wong, FTEC's executive director, the company hopes to sell 1,500 to 2,000 Starter Edition PCs per month. Besides the potential in rural areas, another market for these low-end machines could exist in schools and community projects, he added.
Microsoft CEO Steve Ballmer has proposed that the industry launch a $100 PC as a way both to stem piracy and to offer consumers in emerging countries an affordable computer.
Blue Dot Systems, another reseller of Microsoft's budget Windows package in Malaysia, plans to launch Starter Edition PCs at the end of this month. They will be priced between 1,300 and 1,500 ringgits, a company representative said.
Wickstrand hinted that in Indonesia, Microsoft will partner with a local bank to offer financing schemes for Starter Edition computer buyers.
"To really address the affordability of a PC, what really helps is financing," he said. "If we're going to see a large uptake in PCs, consumer finance needs to be available for the segment we're targeting."
In Thailand, Microsoft is not tweaking its channels strategy but has instead chosen to increase the awareness of Starter Edition by embarking on a five-city tour and an advertising and promotions blitz, the company said.
CNETAsia's Cordelia Lee contributed to this report.
