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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.
Stronger competition from Apple Inc. (AAPL) and Google cut revenue last quarter at Microsoft's devices and consumer licensing division, which includes Windows software, as the computer industry posted its biggest annual decline on record. By offering incentives for PC makers to sell cheaper models, Microsoft may be able to increase its share of the growing $80 billion tablet market and stave off Chromebooks, notebooks that run Google's operating system.
Microsoft, which named Satya Nadella as CEO earlier this month, is seeking to speed up development and introduction of new devices. 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.
Julia Kelly-Echeverio, a spokeswoman for Microsoft, declined to comment.
Microsoft said earlier this month that it has sold more than 200 million licenses of Windows 8 since the program went on sale in October 2012, a slower rate of adoption than the previous Windows 7.
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.
Global computer shipments fell a record 10 percent last year and are forecast to continue to decline this year as tablets and smartphones lure consumers away from traditional desktop and notebook designs, according to data from market research firm IDC. Tablet sales volume -- dominated by Apple and Google, whose operating systems account for 95 percent of that market -- will climb an average 16 percent through to 2017.
To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net
To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net
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