Tim Culpan and Dina Bass from Bloomberg have got a scoop – Microsoft Said to Cut Windows Price 70% to Counter Rivals:
Microsoft Corp. (MSFT) 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. (GOOG)’s Chromebooks, people familiar with the program said.
Manufacturers will be charged $15 to license Windows 8.1 and preinstall it on devices that retail for less than $250, instead of the usual fee of $50, said the people, who asked not to be named because the details aren’t public. The discount will apply to any products that meet the price limit, with no restrictions on the size or type of device, the people said.
It won’t require products that use the cheaper licensing to complete logo certification, a process that verifies hardware compatibility, one of the people said. Devices aren’t required to be touch-screen compatible, they said.
While the regular Windows list price was $50, some of the largest global computer makers paid closer to $30 after incentives such as marketing funds provided by Microsoft, the people said. Products that receive discounted license fees won’t be eligible for such marketing support and incentives, one of the people said.
Free always beats fee as long as the free product is good enough and Chromebooks are evidently good enough for a lot of folks. Microsoft could try to appeal to the carriage trade like Apple but are way behind on both low end apps and cachet. I don’t really think a price cut is going to give Microsoft much more traction.
NPD and Morgan Stanley Research are reporting that notebook PC sales growth (monthly year over year) has been in decline since Apple’s iPad was released and now has gone negative. There are undoubtedly a number of factors at work, but the iPad is surely a major one. Best Buy CEO Brian Dunn “said internal estimates showed that the iPad had cannibalized sales from laptop PCs by as much as 50 percent.”
While this is certainly hard cheese for the PC makers, there is someone else who is taking it on the chin: Microsoft. Almost all of those laptops PCs that didn’t move were running the Windows operating system and many would pick up some version of Microsoft Office as well. Those sales have now vanished and when the Microsoft Windows and Office cash cows stumble, so does Microsoft. Stand by for some interesting earnings reports from Redmond.
Update: There’s a lot of skepticism about Best Buy CEO Brian Dunn’s statement and he’s now backpedaling rapidly without denying he said it. I tend to think it was simply a misstatement since the implied hit on notebooks sales is so much larger than the Morgan Stanley report would require. Speaking of which, a comment from the author of the Morgan Stanley article says that the sales figures showing the decline include netbooks. That is better news for traditional PC makers, but since most netbooks these days run Windows, it is cold comfort for Microsoft.
Last Friday, Joe Wilcox raised the thorny question of whether the iPad is really a PC. It is thorny not just in terms of philosophical and taxonomic abstractions, but in terms of counting by major PC market researchers, Gartner and IDC.
According to Apple’s fiscal third calendar-quarter earnings announcement, 3.472 million Macs shipped during calendar Q2. Apple also shipped 3.27 million iPads. If iPad counts as a PC and the numbers are combined, then Apple shipped 6.742 million personal computers during second quarter. That’s high enough to raise Apple to No. 5 in global PC shipments.
Complete US information is not available, but Wilcox’s analysis shows that adding iPads to the PC total could well put Apple in 3rd place behind market leaders HP and Dell and perhaps higher in Q2. As for Q3:
But what about third quarter? Could Apple top Dell or HP? The answer would depend on how iPad is classified. Is it a PC? If, yes, then based on analysts projections for PCs, Macs and iPads, Apple almost certainly could sell more units than HP or Dell in the United States. I’ve seen Wall Street analysts’ iPad shipment estimates range from about 4 million to over 5 million units. Macs: Hovering above 3 million units. Assuming even half the combined Macs and iPads were sold here, Apple would be in striking distance of topping either HP or Dell.
All of this is more important than bragging rights, of course. The real question is what the iPad surge is doing to the bottom line of the Windows PC hardware makers and to Microsoft’s cash cows of Windows and Office. There may be plenty of room for all with the iPad style tablets creating a wholly new market, but how many iPads are purchased in lieu of a PC or an additional PC? I add that last caveat because the iPad currently has a strong functional dependence on another PC running iTunes so I find it hard to imagine an iPad-only user. Still, grabbing the second PC market has got to hit the Windows PC food chain. Once again, I have to observe that this market could have been Microsoft’s – now we get to see what penalty they will pay for missing it.
I see that Mary Jo Foley has confessed to buying an iPad and I have to confess that I bought one too. Like Mary Jo, it is my first Apple product ever, and like Mary Jo, so far I love it. Or more accurately, I love it when I can get it away from the rest of the family who love it too. Just a few observations, many of which echo Mary Jo’s:
If I had to sum it up, the iPad is an incredible amount of fun. There may be a business use in there somewhere but I am not looking for it.
I do wonder how Microsoft missed this market. This is what Microsoft’s Origami (aka UMPC) should have been but wasn’t, perhaps because it came down from the PC world instead of up from smartphones. As Mary Jo observes, Microsoft is apparently going to try again with Windows 7 or Windows Embedded "slates", and we’ll have to see if they can break their persistent run of problems in the "gadget space," but a company that not long ago had such a large chunk of the smartphone market should have seen this coming, particularly since they did not have any partners in this market to slow them down.