When Microsoft releases its annual financial results July 23, analysts and investors will be watching not only its revenues and profits but also a lesser-known figure known as OEM Premium Mix. It’s a key measure of the company’s business, and an important gauge of the technology economy.

And it has been falling steadily for the past year.

OEM stands for original equipment manufacturer, or computer maker, and the premium mix describes the proportion of manufacturers’ machines that come with high-end Windows editions. Its decrease from 76 percent to 62 percent over the past year reflects trends including the decline of the economy and the rise of “netbooks.” The small notebook computers commonly run lower-priced Windows editions, limiting the amount of revenue Microsoft can get from them.

Priced as low as $300 or less and geared for simple tasks such as web browsing, netbooks were originally designed as secondary computers. Microsoft has said in the past that they appeal primarily to first-time PC buyers or people buying secondary machines.

But as netbooks have gained more computing power and storage, analysts say people are increasingly buying them instead of larger notebooks and desktop computers.

“These things have become so robust that consumers are starting to view them as their primary machines,” said Richard Shim, an industry analyst with the IDC research firm of Framingham, Mass.

For Microsoft, they’ve been a mixed bag. After seeing the open-source Linux operating system initially dominate the netbook market, the Redmond company has come from behind and now claims more than 90 percent market share on netbooks, which it prefers to describe as “small notebook PCs.”

But the netbook boom has given Microsoft fewer chances to sell premium Windows versions, as a proportion of the overall computer market. IDC, which calls them “mini-notebooks,” expects sales of netbooks this year to reach 26.5 million units, or 17 percent of the notebook market. That compares with 11.6 million units, or 8 percent of the market, in 2008.

The market is poised to get even more interesting next year. Google on June 7 announced plans to release a new web-oriented PC operating system, Chrome OS, in the second half of 2010. Google is working with major PC makers, it’s targeting the netbook market, and it’s planning to offer Chrome free.

Because of the lower revenue it gets from Windows on netbooks, Microsoft cited the growth of that market as a major reason for a decrease of $637 million, or 19 percent, in the company’s revenue from copies of Windows preinstalled on computers in the quarter ended March 31. Overall, the company’s PC Windows revenue fell to $3.4 billion in the quarter — a decline of 16 percent from the same quarter last year.

In many cases, that decline comes from people and businesses either delaying their tech purchases or opting for lower-priced Windows versions, said Sid Parakh, an analyst at McAdams Wright Ragen brokerage in Seattle. Microsoft doesn’t disclose what it charges to PC vendors, but a retail copy of Windows Vista Home Basic is priced at $199.95, compared with $239.95 for Windows Vista Home Premium.

“Especially on the consumer side, people are trying to spend as little as they can, because they’re worried about their home or their job,” Parakh said. So even if they’ve been upgrading to new computers and software, he said, many people have decided they can “get by using just basic stuff.”

Microsoft’s Windows Vista has been criticized in part because its system requirements are too much for many netbooks to run properly. However, the company has fine-tuned the upcoming Windows 7 in part to help it work more smoothly on those smaller machines.

At Microsoft’s Professional Developers Conference last year, Windows chief Steven Sinofsky held up a netbook with 1 gigabyte of memory and a 1 gigahertz processor, proudly proclaiming that half of the system memory was still available even when running an early test version of Windows 7.

“We're pretty excited about the work that we've done on performance, and I'm pretty excited about this class of machine and the work that we can do to deliver that Windows 7 on those machines,” he said.

In a nod to the difficult economy, Microsoft is dropping the price for the upcoming Windows 7 Home Premium to $199.95. The new version of the operating system is due out Oct. 22.

For the netbook market, Microsoft is offering a low-cost Windows 7 version called Starter Edition that will be available pre-installed by computer makers. The company hasn’t given a sense for how revenue from that edition will compare to revenue on premium Windows versions, but Starter Edition was originally designed for basic functionality and isn’t considered a premium offering.