With Windows 7 on the horizon and the netbook market still going strong, Microsoft has its sights set on targeting even this low budget segment. It already removed the three-application limit which plagued the Starter Edition of its forthcoming operating system, after receiving a fair share of criticism, but another major factor has yet to be addressed: pricing. Unfortunately, things aren’t looking as promising on that front.

Although the software giant has yet to publicly disclose its pricing for Windows 7 licenses, DigiTimes is reporting the “netbook version” is currently priced at $45-55. This doesn’t seem like a big deal on the surface, but could be prohibitively high compared to the $15-35 XP costs for netbooks, a segment where margins are already low. First-tier vendors are reportedly still negotiating with Microsoft hoping to bring the price down. Others are looking at tying their upcoming N450-based offerings to Windows 7 and charging a premium, while using full-fledged copies of Windows XP for current N270- and N280-based machines.

Microsoft has so far managed to keep Linux from grabbing much of the netbook market by selling XP for cheap. As contenders from Android to Moblin jump into the market, they might need to consider a similar strategy with Windows 7 if the company wants it to become the de facto OS on next-gen netbooks. Then again, it might not matter much in the end, with many arguing that the ‘netbook’ term won’t even exist for much longer due to the blurring lines between these low-cost machines and entry level notebooks.