Last year, Microsoft took aim at Chromebooks with ads that featured personalities from the reality TV show Pawn Stars. Now the software giant is reportedly taking more drastic action by incentivizing OEMs.
Bloomberg revealed on Feb. 22 that Microsoft is planning on massive price cuts to spur adoption of low-cost Windows 8.1 devices. "Microsoft Corp. is cutting the price of Windows 8.1 by 70 percent for makers of low-cost computers and tablets as they try to fend off cheaper rivals like Google Inc.'s Chromebooks, people familiar with the program said," stated Tim Culpan and Dina Bass in their report.
Instead of paying the usual $50, OEMs will be charged $15 for Windows 8.1 licenses that ship on devices that retail for less than $250. "The discount will apply to any products that meet the price limit, with no restrictions on the size or type of device," according to Bloomberg's confidential sources.
Chromebooks are thin-client-like devices that are based on Google's Chrome OS. Designed to boot quickly and hook into Google's cloud-based app ecosystem, Chromebooks offer an affordable alternative to full-blown Windows and Mac notebooks. While comparatively low-spec, adoption is on the rise.
Chromebook sales surged last year, according to market research firm NDP. Through November 2013, Chromebooks sales rose from practically nothing the year before to 21 percent of the commercial notebook market.
"The market for personal computing devices in commercial markets continues to shift and change. New products like Chromebooks, and reimagined items like Windows tablets, are now supplementing the revitalization that iPads started in personal computing devices," said Stephen Baker, vice president of industry analysis with NPD, in a statement.
That growth came at the expense of Microsoft's OS. "Tepid Windows PC sales allowed brands with a focus on alternative form factors or operating systems, like Apple and Samsung, to capture significant share of a market traditionally dominated by Windows devices," stated Baker.
Tami Reller, Microsoft's executive vice president of marketing, said earlier this month that after 15 months on the market, the company had sold 200 million Windows 8 licenses. While a seemingly impressive figure, it falls 100 million licenses short of its popular predecessor, Windows 7, at the 15-month mark.
In his review of the HP Chromebook 14, eWEEK's Todd R. Weiss said he quickly warmed to the device after nearly two decades of owning Windows PCs. "With specifications including a bright, crisp 14-inch screen, a lightweight and easy-to-carry weight of about four pounds, and a long battery life of about eight to nine hours on a single charge, I became one of the converted and grew to appreciate—and even like—having a Chromebook in my life," he wrote.
By providing a margin-improving discount on Windows licenses, Microsoft clearly hopes to win back OEMs and price-conscious users. A bigger slice of the blisteringly hot tablet market may also be within reach. "Microsoft may be able to increase its share of the growing $80 billion tablet market," posited Bloomberg.