Microsoft Cuts Windows, Office Prices For Manufacturers - Is Windows 8 In Trouble?

Unable to light a fire under Windows 8, Microsoft is holding a fire sale instead.

On Wednesday, The Wall Street Journal reported that Microsoft is offering significant additional discounts on both Windows 8 and Microsoft Office to PC makers that will include the software in small laptops that include touchscreens.

Specifically, the Journal reported that Microsoft was offering computer makers a package of Office and Windows 8 for $30, when the normal discounted price of the bundle is $120. It's important to note that even the normal $120 figure already represents a substantial savings over what consumers could expect to pay if they purchased both products at retail; at least $140 for Office and $200 for a Windows 8 upgrade, for a total of about $340. Microsoft representatives declined to comment.

(Microsoft also reportedly honored an accidental "discount" that UK residents discovered, where an upgrade to Windows 8 Pro, normally £189.99, was "mistakenly" offered for £44.99.)

In other words, PC makers are paying roughly 10% of the retail cost of Windows 8 and Office to include the Microsoft programs with their products. Note that the discounts apply to laptops with screen sizes of less than 10.8 inches, which have traditionally cost anywhere from $299 to $499 - iPad territory. The idea, apparently, is that slashing costs will spur PC makers to invest more heavily in small-form-factor Windows 8 laptops, and/or allow them to lower their retail prices. Either way, the Windows world wins.

Why Is Microsoft Cutting Prices Now?

Why is this happening now? Most likely because Windows 8 sales are sputtering.

Using the Net Applications data that Microsoft prefers, in part because Microsoft feels that it more accurately reports real-world usage, the most recent numbers show Windows 8's desktop operating system market share nudging past Mac OS X 10.8. That's expected, given the relatively high percentages of Windows PCs in the market.

Source: Net Applications, Feb. 2013 Source: Net Applications, Feb. 2013

But NetApplications' data also shows Windows 8 sales growth seemingly, possibly, maybe, flattening out a few months after its October launch. In November, NetApps claimed that Windows 8 had 1.09% of the market; in December, 1.72%; January, 2.26%; and in February, 2.67%. Zoomed in, the graph looks like this:

Source: Net Applications, Feb. 2013 Source: Net Applications, Feb. 2013

Is that a peak forming on Windows 8's growth curve, or does the line still indicate signs of healthy growth? Linux blogger (and my former colleague) Steven J. Vaughan-Nichols sliced the numbers a different way, showing that Windows 8 is falling behind Windows Vista, as a month-by-month comparison of the launch shipments shows. 

Windows 8 vs. Windows Vista

The parallels do look similar. Early reviews of Microsoft Vista describe it as an operating system that was nice to have, not a must-have; some, like PC World, called Windows Vista "fun to use". (Doh!) Only Stephen Manes of Forbes called it like history did: "Vista is at best mildly annoying and at worst makes you want to rush to Redmond, Wash. and rip somebody's liver out." (Manes has since authored a book about ballet.)

The point is that as professional observers work to see both the positives and the negatives in a major revision of Windows revision, customer reaction is frequently less nuanced. And once the public collectively decides on the worth of a product, the conventional wisdom can be hard to overcome. 

Windows 8 still has some momentum behind it, partly driven by the Microsoft spin machine and multimillion-dollar ad campaigns for the Surface tablet and Internet Explorer. And Microsoft has made no secret of the fact that if consumers are going to buy a Windows 8 tablet, they really should get a touchscreen.

So what's really happening here? Is Windows 8 already a bust? The market share trends charted by Net Applications offer clues, but it's too soon to tell for sure whether or not that little "hump" is a bump, a step or nothing much at all. But the latest discounts indicate that Microsoft is worried enough to sacrifice its margins to juice sales of smaller Windows 8 devices. Will it be enough to make a difference?

 

Image Source: Flickr/Ambernectar 13