Microsoft is attempting a new strategy that it hopes will conquer the cheap laptop and tablet market with Windows 8.1. The software giant plans to cut Windows 8.1 license fees by 70 percent, which would give OEMs more room to release a $250 tablet or laptop, that won't eat into their profit margin. If true, it would be a solid idea from Microsoft, as more consumers are slowly looking to cheap Google Chromebooks for basic Internet-based computing.
According to Bloomberg, a Windows 8.1 license would normally cost $50, but Microsoft is on the verge of slashing it to a whopping $15. However, there's a catch, as one might have expected. The discounted Windows 8.1 license would only be available to OEMs that are interested in selling tablets or laptops below the $250 mark. Anything above that and the $50 license will still apply, so consumers should see an increase in cheap Windows 8.1 devices on the market in the coming months.
Microsoft may not admit it and the software giant may continue screaming 'Scroogled', but the influx of Chromebooks and cheap Google Android tablets are posing threats to its ecosystem. The threat might not be causing significant problems right now, but as time goes by, this would likely change as consumers gravitate towards cheaper devices that are more than capable of doing basic computing tasks.
Furthermore, the software giant is finding it very difficult to sell the Windows 8 idea to consumers. Adoption has been slower than expected, as only 200 million Windows 8 licenses were sold in the first 15 months, compared to Windows 7's 350 million.
"Competing with Chromebooks may be a motivator, but likely the bigger motivator is in tablets," according to Ross Rubin, an independent analyst with Reticle Research. "Microsoft still has a dominant share of the clamshell market, but it is far behind in tablets. That's a form factor where Windows 8.1's touch capabilities represent market expansion. That's where it really needs to gain share. The pricing competition in smaller form factors is even more brutal than it has been with Chromebooks."
This report by Bloomberg ties in nicely with the rumor that Microsoft is considering offering Windows license to OEMs free of cost. This could turn out to be the first step, but before this could ever happen, Microsoft would need to locate another revenue stream to replace selling licenses to OEMs. It is likely the company might solve this problem by charging OEMs to include a version of Ofice and or other services such as SkyDrive and Xbox Music.
Can Microsoft succeed with this strategy to combat Android and Chromebooks? It is possible, but first the company must fix the issues surrounding Windows 8.1 before embarking on this journey. Arguably, Windows 8 devices are not selling due its design, so it won't make a difference to Microsoft's backend if nothing is done to please consumers.
If rumors are to believed, Microsoft is well underway with fixing the operating system. We should get more information about this at the company's BUILD developer conference in April.
