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Microsoft Reportedly Lowering Windows 8.1 Costs to OEMs

Microsoft appears to be making moves to combat its slipping operating system market share due to mobile OS competition from Android and iOS.

Most of the signs come from various reports, citing unnamed sources, rather than from Microsoft itself. For instance, Microsoft reportedly is decreasing Windows 8.1 licensing costs for original equipment manufacturers (OEMs) that make lower priced devices, provided that Bing search gets bundled, too.

The idea that Microsoft will offer this "Windows 8.1 single language with Bing" edition hasn't been announced by the company, although a report by tech journalist Paul Thurrott shows what appears to be a screenshot of this new operating system edition. Thurrott said that OEMs making devices for less than $250 would be eligible to get the new edition.

The cost for the cheaper OEM licensing may be as low as $15, instead of the typical $50 license fee, according to a report by Bloomberg, citing unnamed sources.

The first update to Windows 8.1 is scheduled to arrive this spring, but it's more specifically rumored that it will arrive on April 8, which is Microsoft's patch Tuesday release date for that month. While most of the coming improvements in Windows 8.1 Update 1 center on making the OS more friendly for mouse-and-keyboard users, it also will have some improvements specifically tailored to help hardware manufacturers build low-cost devices, Microsoft has indicated.

Catching Up to Mobile
Microsoft faces a Windows dilemma with PC shipments trending down or flat, even as Google's Android and Apple's iOS OSes have grabbed market share. When mobile OSes are factored into market-share calculations, Gartner Inc. estimates that Windows will have just 25 percent of the global OS market by 2016. If that turns out to be the case, then that number would be a pale shadow of the widely quoted claim that Windows once ran 90 percent of the world's PCs. While Windows may still own the PC market to a degree, it's getting way behind in the mobile and tablet OS race.

Microsoft's mobile OS efforts have tended to falter over the years, from Windows Mobile to the ill-fated Kin. Supposedly, Microsoft has considered offering Windows Phone and Windows RT free to OEMs, according to reporting by The Verge. That claim is at the rumor stage, although it would match Google's practices with Android. Google currently offers Android to OEMs royalty free. Google's model with Android is that it makes up for the OS' costs with the profits to be gained from its search advertising business with the greater numbers of mobile users accessing its search engine.

A consultant to Microsoft, Benjamin Edelman, an associate professor at Harvard Business School, has pointed to Google's Android deals with OEMs, suggesting that the deals come with some strings attached. For the privilege of running Android royalty free, OEMs have to agree to bundle various Google apps on their devices, Edelman contends, pointed to unsealed court records. This exposure of bundling practices by Google may be the first shot as Microsoft prepares to bundle Bing and other apps in a similar way.

Bundling agreements like Google's have subjected Microsoft to antitrust litigation in the recent past, particularly in the European Union, where it's considered a violation of competition laws to use a monopoly product to push another product. However, with Windows tablet use at 2 percent, per Gartner, Microsoft conceivably could argue that Windows isn't a monopoly anymore, whereas Android-based tablets with 62 percent market share is closer to the mark.

A report last month by The Wall Street Journal indicated that European Union officials are already checking to see if Google has abused its position with Android in the smartphone market. Supposedly, Google made HTC and Samsung sign "mobile application distribution agreements" specifying that certain apps must be preinstalled on their devices in order to use Android.

Microsoft Supporting Dual Boots?
Google supposedly put pressure on Asustek not to release its TD300 tablet, which is capable of booting either Android or Windows, according to a report this month by Digitimes. The Asustek device uses an Intel x86 chip capable of running either OS. Update: On March 14, The Wall Street Journal reported that Microsoft, too, squashed Asustek's plans for the dual-boot TD300 tablet, possibly over a dispute over royalty claims for Asustek's use of Android. Asustek is also killing off its dual-boot Asus Transformer Aio P1801 and P1802 PCs, according to The WSJ's account, citing "people familiar with the matter" and an internal memo.

While Google seemingly is resisting the development of dual-boot Android and Windows machines by OEMs, Microsoft may not be opposing it -- at least on the smartphone side. A report by The Times of India claimed this month that mobile device hardware maker Karbonn Mobiles is planning to release dual-OS devices running either Android or Windows Phone sometime this June. Purportedly, Karbonn Mobiles signed a license agreement with Microsoft to that effect.

Nokia, soon to be owned by Microsoft, is targeting the low-end smartphone market with Android-based devices that can use Microsoft services such as OneDrive and Skype. The Nokia X devices have a Windows Phone-like tile user interface and tap Nokia's store rather than the Google Play store. Nokia's lowest priced smartphone, the Nokia 220 running the "Nokia OS," comes with Bing as the default preloaded search engine.

In other words, all signs point to Microsoft possibly tolerating Android in dual-boot scenarios, even on Microsoft-owned Nokia devices. Microsoft also may be preparing to emulate the sort of bundling of apps practiced by Google. Microsoft may not gain Windows OS market share by doing so, but it might be able to keep application developers engaged in building for Windows platforms, while also monetizing Windows 8.1 or Windows Phone OSes through Bing search advertising.

The other missing piece of the puzzle is Microsoft's other cash cow, Microsoft Office. So far, Microsoft officials have been cagey about supporting the full Office suite on Android, with most echoing former CEO Steve Ballmer's statement that the company would make Office available to that platform through a browser. Microsoft currently supports Office Mobile for Android (a more limited version of the product for viewing and light editing that requires an Office 365 subscription) and is planning a release of Office Web Apps for Android sometime this year.

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