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2/22/2014
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Windows 8 Devices Get Cheap

Microsoft will reportedly cut Windows license fees to encourage production of sub-$250 Windows 8 devices, including non-touch PCs.

If anything has encouraged Windows 8 device sales, it's been lower prices. So Microsoft and its partners might be about to sell a lot of new PCs and tablets: Microsoft is slashing the cost of Windows 8.1 licenses for OEMs by 70%, according to a Bloomberg report published Friday evening. Citing people familiar with the company's plans, the article states manufacturers will pay only $15 to license the OS -- but only for devices that will retail for less than $250. The program reportedly aims to combat Chromebooks, which have eaten into Windows sales at the low end of the market.

In response to an inquiry about the report, a Microsoft spokesperson told InformationWeek, "We have nothing to share."

[ Are you feeling the Windows XP fury? Read Windows XP Shutdown Outage: Users Boo Microsoft Blog. ]

Friday's report isn't the first indication that Microsoft is modifying license costs in order to stimulate Windows 8 adoption. Last March, The Wall Street Journal and the Taiwanese tech website DigiTimes independently reported that Microsoft had cut OS and Office license costs to stimulate production of smaller Windows 8 tablets.

The company never confirmed those claims, but products that have since hit the market support the narrative. After sticking with prohibitively expensive price points for the first half of 2013, OEMs such as Dell, Toshiba and Lenovo spent the second half touting inexpensive mini-slates that come pre-loaded with Office. Other reports from late last year claimed Microsoft might altogether eliminate license costs for Windows Phone and Windows RT.  

Many Windows 8.1 devices could soon sell for less than $250.
Many Windows 8.1 devices could soon sell for less than $250.

Microsoft announced strong quarterly results in January. As has been the case for much of the last year, however, Windows figures were tinged with troubling signs, including a 3% year-over-year revenue drop. That mark was good enough to beat 2013's historic 10% decline in PC shipments but it was also inflated by a 12% boost in revenue from the professional-oriented Windows OEM Pro -- and masked how much the consumer PC market has unraveled.

Microsoft also recently announced it had sold more than 200 million Windows 8 licenses -- a large number, but also one that trails Windows 7's precedent by a significant margin. Windows 8 and 8.1 accounted for less than 11% of desktop users in January, finishing third behind Windows 7's 47.5% and Windows XP's 29.2%.  Win 8 also remains a niche player on the tablet scene, where iPads and Android tablets control most of the market. Apple's tablets have carved out particular dominance within the enterprise

It's noteworthy that the new program allegedly targets Chromebooks. Microsoft's Windows 8 ads have taken swipes mostly at Apple's iPad, but as the low-cost Chromebooks have become popular in industries such as education, Microsoft has switched tactics. Andrew Waber, an analyst with online ad network Chitika, told InformationWeek's Thomas Claburn that Chrome OS could become more popular in the enterprise thanks to Google's recent pact with VMware to offer virtualized Windows desktops on Chromebooks.

Chromebooks now come in a variety of form factors, such as LG's Chromebase, an all-in-one desktop.
Chromebooks now come in a variety of form factors, such as LG's Chromebase, an all-in-one desktop.

Also noteworthy: Whereas Microsoft allegedly cut license costs last year to promote tablet growth, the new program reportedly applies to any device under $250 -- including PCs and laptops without touchscreens.  

As such, the reduced license fees tie neatly into recent reports that Microsoft wants to re-engage its longtime PC users, many of whom grew disenchanted with Windows 8's more radical UI departures from previous versions. Microsoft's efforts are expected to include an update to Windows 8.1 that could arrive by April and make the touch-oriented OS more palatable to mouse-and-keyboard users.

With various leaked builds circulating online, the update appears imminent. It includes more refined integration between the Modern and desktop interfaces, including Live Tiles that respond better to mouse commands, and the ability to pin Windows Store apps to the desktop's taskbar. The update will also allegedly recognize the type of hardware on which it is installed and adjust accordingly; it is expected to boot to the desktop by default on non-touch hardware, for example, and to continue booting to the Modern UI on touch-equipped devices.

Forrester analyst David Johnson told us last week that the update sounds promising. "They have two operating regimes," he said, "and they are learning that it's not a good strategy to sacrifice one to make the other better."

Still, the upcoming update is not expected to reintegrate Windows 7's Start Menu, the absence of which has upset some users. According to various reports, the Start Menu, as well as the ability to run Modern apps in windows on the desktop, will debut in Windows 9 in 2015

Will users wait until 2015 for a feature that's been in other Windows versions for years? Johnson said Microsoft might be moving slowly and deliberately in order to avoid the perception it has made a mistake. "If they try to move too quickly, it could undermine confidence in the Modern UI, which they need to be committed to," he said.

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Michael Endler joined InformationWeek as an associate editor in 2012. He previously worked in talent representation in the entertainment industry, as a freelance copywriter and photojournalist, and as a teacher. Michael earned a BA in English from Stanford University in 2005 ... View Full Bio

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Laurianne
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Laurianne,
User Rank: Author
2/27/2014 | 2:58:54 PM
What is the right price?
I am helping a family member shop for a new tablet right now. (I brought up Chromebooks as an option, for the price advantage. But not everyone wants to learn a new interface.) What do people think the right pricepoint is for a Windows 8 tablet?
Michael Endler
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Michael Endler,
User Rank: Author
2/25/2014 | 3:13:53 PM
Re: How does a $250 Windows 8 laptop sound? Or a $200 2-in-1?
Maybe, but Microsoft runs interesting promotions-- e.g. buy Office 365 for your teachers and all of your students get it for free. That stuff had already sweetened the deal enough to persuade some, and cheap devices can only help.

My bigger concern is that the new devices end up too cheap. The first low-cost Windows mini-tablets (i.e. that used the previous generation Atom chips) were almost unusable because of poor hardware-- I'm talking about at you, Acer Iconia. The newer, post-8.1 batches have been much better, thankfully. Anyhow, the same point could apply for these forthcoming, low-cost Windows laptops and 2-in-1s. Budget devices can filter users toward more lucrative services and higher-end machines-- but if the device components are too cheap and the experience suffers, it won't help.

Plus, as I've noted elsewhere, Windows 8.1 hasn't appeased mouse-and-keyboard concern as much as I'd expected. The upcoming update takes things a step further than 8.1-- but if it also produces less-than-anticipated adoption, what then? The idea that a $250, non-touch Windows PC will satisfy is predicated on the UI being agreeable to the average user.

Suffice to say, I see the market, but I also see the ongoing concern.
Michael Endler
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Michael Endler,
User Rank: Author
2/25/2014 | 1:18:01 PM
Re: How does a $250 Windows 8 laptop sound? Or a $200 2-in-1?
I don't think Office is irrelevant by any means, though it doesn't appear invincible in all markets any more. For enterprises, I think Office 365 presents a lot of legitimate benefits. For consumers, the advantages are less obvious-- especially because, as you point out, a lot of free/cheap alternatives are "good enough" unless you're a power user. But even for consumers, the multi-device licenses can be useful, and as Office apps become increasingly integrated with one another, the suite's collaboration and social tools could become a bigger deal, in the office and at home. In any case, even if there are good alternatives to Office, I think a market clearly exists for sub-$250 Windows PCs. Give students a non-touch, $200 laptop that runs Office, for example, and I think you'll see a lot of happy school administrators. The 8-inch Windows tablets that come close to that price point aren't all that useful for Office-- but a 13-15 inch, no frills laptop offers clear utility at that price.
ChrisMurphy
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ChrisMurphy,
User Rank: Author
2/24/2014 | 8:08:09 PM
Re: How does a $250 Windows 8 laptop sound? Or a $200 2-in-1?
I would be very interested in that kind of laptop for my middle school students. But part of the story here also is Office. My kids prefer Office apps, but they don't have it on their laptop because of the cost, and they also use Google Apps because they're so easy to share. They don't love Google Apps, but they're getting very used to them.  
Michael Endler
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Michael Endler,
User Rank: Author
2/24/2014 | 7:43:59 PM
How does a $250 Windows 8 laptop sound? Or a $200 2-in-1?
Chromebooks don't generally offer the nicest hardware experience, but they've become popular because they balance functionality and cost. Microsoft didn't confirm this licensing deal at Mobile World Congress, but it forecast its intention to pursue cheaper price points. Would a $200 or $250 non-touch Windows 8.1 laptop that boots to the desktop be equally attractive? As Microsoft likes to point out, Windows can do more than Chrome. If Windows beat Chrome on functionality, matches Chrome on price, and is close on user-friendliness, shouldn't the scales tip more fully in Microsoft's favor?

And what about the cheap tablets that Microsoft promised at MWC? In my experience, low-cost tablets become pretty unsatisfying if OEMs skimp too much on components.

 
Michael Endler
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Michael Endler,
User Rank: Author
2/24/2014 | 7:38:25 PM
Crap or not crap?
I think the fact that most comments here are of the "crap" or "not crap" variety demonstrates how polarizing Windows 8 is.

The divisiveness surprises me a little, to be honest. Sure, it made sense at first, but I expected it to diminish after Windows 8.1-- not because 8.1 is amazing or anything, but because it made the OS functional enough for two distinct groups of users. As anyone who's read my editorials about 2-in-1 devices knows, I think Microsoft's convergence play will cater to niches for the immediate future-- so I'm not surprised that Windows tablet sales are still a bit soft. But I am surprised that desktop users have been so unimpressed by Windows 8.1.

When Windows 8 initially launched, I thought it offered an okay tablet UI that, thanks to Microsoft's strong arm tactics, significantly detracted from the desktop. When Windows 8.1 arrived, I thought it would silence some of this discontent. No, there's still not a Start Menu, but in less than five minutes, you can enable boot-to-desktop, disable hot corners, and otherwise banish most signs of the Modern UI and its touch controls. In essence, you can turn Windows 8.1 into a faster, more stable version of Windows 7 (minus the Start Menu). Even so, less than 40% of combined Windows 8/8.1 users are running the update (according to Net Applications), which doesn't suggest desktop users are rushing to upgrade.

As for the upcoming update to Win 8.1-- sounds pretty reasonable to me. It makes the OS friendlier to people with non-touch devices but doesn't retreat from the Modern UI on touch hardware-- not a bad way to go, considering the position in which Microsoft found itself heading into the update's development.

But Windows 8.1 hasn't caused much of a stir-- so will this update achieve more? In some ways, 2015's rumored Windows 9 sounds a lot like what Windows 8 should have been originally. But will this spring's update be enough to sustain things in the meantime? With Windows XP losing support just as this Windows 8.1 update (and allegedly cheaper devices) are set to debut, maybe Microsoft's new OS can finally make more than an incremental market share gain.
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