Microsoft preparing to slash Windows 8.1 prices

Microsoft rumoured to be dropping price to OEMs as it steps up fight against Chrome and Android

Microsoft is reportedly getting ready to slash the price charged to OEMs for preinstalling Windows 8.1 on low-cost PCs and tablets to better compete against Google and stave off the growing popularity of the Chrome and Android operating systems.

Bloomberg and other news outlets are citing unnamed sources at Microsoft who say OEMs will be required to pay as little as $15 per Windows 8.1 device that retails for $250 or under. Currently, the price is $50 per device. The new price, if it comes to fruition, is a 70 percent reduction.

Speculation is Microsoft is feeling increased pressure as more PC manufacturers field Google Chrome and Android devices. Nearly all of the major PC makers now have a version of the Chromebook and some, including Hewlett-Packard, have launched PCs running Android.

While Chrome market share still doesn't register among the major operating systems, the platform is growing fast. According to The NDP Group, sales of Google's Chromebooks and Android-based tablets through the channel surged in 2013 to 1.76 million units compared to 400,000 in 2012. Chrome and Android are credited with dampening revenue of Microsoft's vaunted Windows division in the last quarter.

Microsoft seems ready to concede that its traditional licensing model is part of the reason Windows 8 and 8.1 sales have been comparatively sluggish. Windows 8 was released in October 2012; and Windows 8.1 - the update that restored many features demanded by users - came out in October 2013. Combined, the operating system has just a 10.6 percent market share. By comparison, Windows 7 commands the operating system market with a 47.5 percent share. Windows XP, which Microsoft is ending support in April, retains 29.2 percent market share.

Many industry observers are blaming Microsoft for the continued decline in PC sales over the last two years. In 2013, global PC sales fell more than 10 percent. Critics say is a deeply flawed product that failed to spark a refresh cycle. While the end of life of Windows XP will cause many consumers and businesses to upgrade, they're either going to Windows 7 or an alternate platform.

Windows 8's woes may go deeper than just the price charged to OEMs. Many business users say the operating systems isn't suited to commercial implementations. And businesses and consumers alike say they can't get the applications that would make Windows 8 operating system that bridges personal and professional lives. Even Microsoft is conceding this is an issue by signaling that it may allow Android applications on Windows 8.

Solution providers are widely dismissive of the Windows 8 platform, even as they support Microsoft. Legacy relationships and install bases are carrying Microsoft's channel forward. However, many solution providers are concerned that Microsoft is drifting away from the channel, which is causing many to embrace alternative platforms as a secondary hedge.

If Microsoft does cut Windows 8.1 prices, it will go a long way to make Windows-based devices more palatable on the pocketbook. However, the move will do little to improve usability and user experience.

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