Microsoft Corp said on Thursday it plans to cut prices of its Windows Vista operating system sold at retail outlets in a move aimed at pushing customers to switch to the newest version of Windows.

The world's largest software maker said it plans to lower retail prices for Vista in 70 countries later this year in tandem with the shipment of the first major update to Vista, known as Service Pack 1 (SP1).

Packaged versions of Windows Vista sold at stores and on the Web account for less than 10 percent of all licenses of the dominant Windows operating system that sits on more than 90 percent of the world's personal computers.

Most consumers opt to buy a new PC, which comes preloaded with the latest version of Windows.

We anticipate these changed will provide greater opportunities ... to sell more stand-alone copies of Windows, said Brad Brooks, a Microsoft corporate vice president.

In the United States, Microsoft will reduce prices for Windows Vista Ultimate, the company's top-end operating system, to $319 from $399 for the full version and cut the price for an upgrade version to $219 from $259 for consumers who already run Windows XP or another edition of Vista.

It also cut prices for upgrade versions of Vista Home Premium, its mainstream product, to $129 from $159. The price cuts vary by country.

In emerging markets, Microsoft will stop selling upgrade versions of Vista, because, for many customers, it will be the first purchase of a genuine copy of Windows. The company will instead sell Vista Home Premium and Home Basic, a stripped-down version, at the upgrade prices.

Microsoft has sold more than 100 million licenses of Vista since its January 2007 release and its adoption has underpinned strong earnings results at the company in recent quarters.

Nonetheless, some consumers have raised issues with Vista's performance, stringent hardware requirement and lack of support for other software and devices like printers. Microsoft said it would continue to sell Windows XP until June 2008, delaying a scheduled transition to Vista.

Brooks, who oversees consumer marketing of Vista, said he is confident the company can bring in enough new customers to offset the revenue declines from lowering prices after seeing the results of a recent three-month promotional trial of lower Vista prices.

The announcement comes on the heels of sales data that showed a 30 percent drop in money spent for software at U.S. retailers in January, according to market research firm NPD.

Microsoft said the announcement is unrelated to the sales data, which the company said could be a result of inventory build-up after the holiday shopping season.

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