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Will Slashing Windows Licensing Help Microsoft Tablet Sales?

Looking to boost its fortunes in the low-end tablets market dominated by Apple iPads and devices running Google's Android operating system, Microsoft is reportedly looking at sharply reducing the fees it charges manufactures to license Windows 8.1.

The news, first reported Saturday by Bloomberg, could be announced at this week's annual Mobile World Congress taking place in Barcelona. Citing unidentified sources familiar with the plan, Microsoft will lower the cost manufacturers pay to license Windows 8.1 on tablets by 70 percent from $50 to $15. The new fees would apply to tablets priced below $250 but they could be used on any size or type of device.

While Microsoft didn't comment on the report, it did announce at Mobile World Congress nine new Windows Phone partners. On top of its existing partners Samsung, HTC, Huawei and Nokia, the new influx includes Foxconn, Gionee, JSR, Karbonn, Lava (Xolo), Lenovo, LG Electronics, Longcheer and ZTE.

At Mobile World Congress, Microsoft also announced support for Qualcomm's  Snapdragon 200 and 400 series chipsets and options to support all the major wireless network protocols including LTE (TDD/FDD), HSPA+, EVDO and TD-SCMA (as well as soft keys and dual SIM).

Microsoft's Joe Belifore also confirmed a Windows 8.1 update is coming this spring that promises to appeal more to mouse-and-keyboard users. While not addressing the Windows licensing price cuts, Belifore did say in a blog post  that Microsoft is moving to lower manufactures' licensing costs. "We'll enable our partners to build lower cost hardware for a great Windows experience at highly competitive price points," he said

The company needs to take drastic action if it wants to be a formidable player in the tablet market now dominated by Google and Apple. Google doesn't charge manufacturers any licensing fees for Android or Chrome OS. The added licensing fee of course adds to the price of the device.

For example, the cost of a Dell Venue 8 running Android is currently priced at $229, while a similarly configured Dell Venue 8 Pro with Windows 8.1 now costs $299 (based on prices listed on the company's Web site).  However the Dell Venue Pro also ships with an Office 2013 license, which also adds to the price. But with the current $299 price tag for the Dell Venue Pro 8, it wouldn't be eligible for the reduced Windows 8.1 license fees. Dell would need to lower the price to $250.

Also as the Bloomberg report noted, some of Microsoft's largest suppliers paid Windows licensing fees closer to $30 after marketing funds and other promotional incentives were taken into account.  Meanwhile, Nokia launched its rumored Android phone, the Nokia X at Mobile World Congress. It will be interesting to see whether Microsoft will continue to support that after its $7.2 billion deal to acquire Nokia closes.

What do you think about Microsoft lowering its Windows license fees to go after the low-end tablet market?

Posted by Jeffrey Schwartz on 02/24/2014 at 11:36 AM


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