Microsoft is getting tired of Google and Apple eating their lunch, especially in the ultra-cheap sub $300 notebook, netbook and tablet market. As it stands right now, Microsoft charges $50 per device (their publicly stated number) for a discounted Windows license for ‘cheaper’ devices. No, consumers do not have access to this pricing as it is only for OEMs to install on their devices. And now, Bloomberg is reporting that Microsoft is planning to cut this price to $15 per device for devices under $300 in a bid to compete with the sudden influx of Chromebooks and cheap Android tablets which are cannibalizing Microsoft’s low-end high-volume business.
Microsoft was able to put longer legs on Windows XP when netbooks first came out and I’m sure very many people inside Microsoft were happy. But then, Chromebooks started to surface and effectively replaced Netbooks as more affordable, better performing very cheap notebooks who’s sole purpose was web browsing. After all, that’s what a Netbook is all about, right? So, with the influx of a high volume of cheap Android tablets and Chromebooks, Microsoft’s Windows market share is taking a hit in the low end. OEMs like HP, Samsung and Acer are being drawn to the idea of building very inexpensive Chromebooks and selling them by the millions to people that are already familiar with Chrome, which makes ChromeOS a breeze.
Microsoft’s plan to cut the price to $15, I believe is part of a bigger plan on the part of the company to get more serious about mobile and to put the company’s full strength behind their mobile effort, at all costs. Microsoft understands that in order for their platforms to be successful (desktop and cloud) they have to be able to entice people to use those services through their OS. While I have heard articles that say that Microsoft should make Windows free, this isn’t necessarily a good idea. Sure, Microsoft could get away with doing so considering how profitable their other businesses are, but they can’t supplement their OS development with ad revenue like Google can. It is best that Microsoft charges a reasonable price for their OS in order to be able to get people interested in their cloud offerings.
I believe that Microsoft will make more pushes in Windows proliferation soon and that we could see more cheap Windows devices thanks to this $15 price point. At $15, its almost cheaper to implement Windows 8.1 on a tablet or notebook than use Android and have to pay a licensing fee to Microsoft anyways. I think this is part of their strategy, they just want to say, "Hey, you’re going to end up paying us either way, might as well use a full-fledged OS." While I don’t know how well this approach will work, I do believe that Windows 8.1 is a very good OS for mobile productivity and this could spark some serious competition in the low-end for OEMs and chip vendors.