Redmond View

Does Windows 8 Need a Hail Mary?

What if Microsoft threw another Hail Mary and gave away small tablets?

• By Jeffrey Schwartz
• 06/01/2013

Microsoft founder and chairman Bill Gates found himself in the tech spotlight last month when he said users are "frustrated" with their iPad devices. The loud and predictable response was that Microsoft is frustrated with the 19.5 million iPad devices that shipped last quarter compared with only 900,000 Surface tablets, according to IDC. No doubt Gates and CEO Steve Ballmer are frustrated. After all, Gates promised more than a decade ago that Microsoft would lead in the tablet world, but the company has so far failed to get the job done.

These days Gates devotes most of his time to addressing world hunger and poverty -- certainly a much more noble and important cause than worrying about how many iPad devices or Windows 8 systems people are buying.

But it's a safe bet that whatever small portion of time Gates is spending in his role as Microsoft chairman, he's advising Ballmer on how to make sure the company sees a reversal of fortunes.

The two have been down this road before. Perhaps there's no better example than when Netscape Navigator was the dominant browser and pundits predicted it would lead to the demise of Windows because users could access the Web without an OS. Gates and Ballmer responded by acquiring

Spyglass and ultimately developing Internet Explorer. Microsoft threw a Hail Mary by offering Internet Explorer for free and bundling it with Windows. At the time Netscape Navigator cost $49, but the company was forced to give it away once Microsoft did the same. The rest is history.

What if Microsoft threw another Hail Mary and gave away small tablets running the upgrade to Windows 8, dubbed Windows "Blue"? According to published reports, Apple's cost of building the iPad Mini is $188, the cost to build Google Nexus 7 is $159.25 and it's just $141 to build the Amazon Kindle Fire HD.

Let's say a Windows Blue tablet cost a bit more to make, perhaps $200 apiece. What if Microsoft gave one away to anyone subscribing to Office 365 for three years, or threw one in for anyone buying a Windows 8 PC?

Microsoft's largest acquisition to date was Skype, which cost $8.5 billion. If Microsoft chose to give away 50 million Windows Blue tablets at a cost of $200 each, it would have to earmark $10 billion. That's a lot of money, but Microsoft today has a cash hoard north of $60 billion.

Considering that five years ago Microsoft was willing to squander $44 billion to buy Yahoo! -- and wasted $6.3 billion on aQuantive -- how much worse could Microsoft do? For this to pass muster with its partners, Microsoft would also have to offer them subsidies to offer free versions of their hardware. In fact, perhaps that's the way Microsoft should go, rather than further rankling OEMs by offering free Surface devices.

I've heard nothing to suggest Microsoft is considering such a move, and in fact insiders may shun such an idea. Is it far-fetched or something that could generate more demand for Windows tablets? Drop me a line at [email protected].