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Thursday, June 25, 2009, 04:10 pm PT (07:10 pm ET)

Windows 7 priced below Vista, to allow upgrades from XP

Microsoft tried to appease disgruntled customers on Thursday with news lower Windows 7 upgrade prices as well as a concession that lets owners of the now 8-year-old Windows XP move up to the new operating system at a lower price.

The company settled the uneasy question of how it would price its next-generation OS on Thursday by detailing the costs for the three Windows 7 editions customers are likely to see in stores.

In a bid to placate those upset by elevated Vista pricing, some versions of Windows 7 will be less expensive than Vista has been in the past. At retail, a Home Premium upgrade will cost $120 — $40 less than it did when Vista was new — while its stand-alone version has dropped a similar amount to $200. Buying a copy of Professional will cost the same $200 (upgrade) or $300 (full) as it has in the past, but Windows 7 Ultimate will cost $220 to upgrade versus the $260 for Vista Ultimate in 2007. A full copy of the new Ultimate release costs $320 versus $400 two years ago.

Moreover, those eager enough to pre-order the new OS before it ships on October 22nd can pay even less. Starting Friday, advance orders for Windows 7 Home Premium and Professional upgrades will cost just $50 and $100 each in the US and should last until July 11th or until stock runs dry. Many PC vendors, including HP, will also offer upgrades to Windows 7 for free or for a small cost on any PC sold from Friday until Windows 7 comes preloaded on the new computers.

And in a rare gesture for Microsoft, the company will allow those using the now two generations old Windows XP to use an upgrade copy rather than pay full retail. However, due to the change in architectures between Windows XP and 7, buyers will have to perform a clean install rather than the in-place upgrade Vista owners can use.

Both the smaller price tags and the XP extension have already been seen as near-mandatory concessions for the Redmond, Washington to regain acceptance. After early reports of poor compatibility and slow performance, many home users and businesses alike have often chosen to remain with the 2001 operating system rather than upgrade to Vista, even after Microsoft insisted that its Service Pack 1 update addressed many early issues. Vista pricing was slashed in early 2008 partly to underscore the point.

The Windows developer also took to an elaborate, $300 million ad campaign that both sought to put Windows back in the public consciousness and turn attention to hardware pricing versus Apple's Macs instead of promoting the operating system itself.

Whether a sincere gesture to regain customer loyalty or not, the pricing makes Apple's Mac OS X Snow Leopard upgrades a better deal for those considering upgrade pricing as a factor. As the update will ship for just $29 and a month earlier than Windows 7, it's expected that a larger percentage of the Mac user base will be running Snow Leopard early on than PC users will rush to install Windows 7.