Redmond (WA) – It’s not that Microsoft does not have enough server software products already. There are 45 different packages addressing all those segments businesses may or may not think of. But Microsoft believes there a big gap in its portfolio and it may have a case: A sub-$500 server.

If you think about it, running a server based on Microsoft software at home is not a simple and especially not a cheap project. Microsoft now believes that there is a considerable number of people who are not willing to spend much on server software let alone hardware, but may actually be interested in a basic Windows Server.

Within the next two month, Microsoft plans to announce a "low-cost, low-price, low-functionality Windows Server SKU" called "Foundation Edition," chief executive officer Steve Ballmer said in a conference call with financial analysts. He compared this software to the netbook phenomenon, which enabled Intel to sell millions of processors into a newly created computer segment within a short period of time – and enabled Microsoft to leverage this market to sell millions of Windows (XP) licenses, while the rest of the market tanked.

So, can there be a netbook-like Windows server? A cheap Windows server that translates the netbook success into the server market? Steve Ballmer is convinced. “If you take a look at it, as server prices, hardware prices have come down, we don’t exactly have a netbook phenomenon, but if somebody can buy a $500 server, they’re a little loathe to spend $500 for the server operating system that goes with it,” the executive said.

The standard choice for entry-level Microsoft servers is the Small Business Server, which includes the standard server, Exchange, Share Point, Server Update and Forefront – all for a street price of about $1000. Standalone standard server pricing currently begins at $470 for the Web Server Edition. Of course, there’s also the Windows Home Server (WHS) for $100, which covers most of the tasks that home users may expect from a server – backup, file-sharing and remote data access. But, conceivably, there is room between the WHS and the standard business server and a product that would act a bit more like a standard server and can be configured in more ways than the WHS.

According to Paul Thurott, who wrote about this new server already two months ago, the Foundation Server will support all the key Windows Server roles except Hyper-V virtualization. The primary target apparently surrounds the popular “emerging markets” theme, but if netbooks are any indication, there may be a substantial opportunity in saturated markets as well: Early adopters, enthusiasts and perhaps even home businesses. Thurott said the Foundation Server will sell for about $200, which should enable system vendors to come up with a sub-$500 server package.