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Report: Microsoft About To Slash Price Of Windows 8.1

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Fierce competition from Google (NASDAQ: GOOGand Apple (NASDAQ: AAPL) is forcing Microsoft to alter its pricing structure for Windows 8.1., according a report by Bloomberg over the weekend. Microsoft (NASDAQ: MSFT) will slash the price of Windows 8.1 by 70 percent for manufacturers of inexpensive computers and tablets to help them be more competitive against rival devices like the Chromebook. 

Instead of the usual licensing fee of $50, manufacturers of machines that retail for less than $250 would pay only $15 to install Windows 8.1. Bloomberg sources said the discount would apply to any product that meets the price restriction with no limit on size or type of device. 

Related: Will 'Innovator-in-Chief' Be Bill Gates' New Role at Microsoft?

The competitive pressures are intense; the computer industry as a whole posted its biggest annual decline on record. Chromebooks, in particular, which run Google’s OS, have been commanding a larger and larger share of the $80 billion tablet market. Microsoft hopes the price cut on its operating system will help computer makers that already sell lower-cost devices compete. The company also hopes to encourage manufacturers to produce more low-end machines to crowd out Google and Apple.

More pricing changes may be on the way: The Verge reported that Microsoft had been considering making Windows Phone and Windows RT systems available free to device makers. 

Price cuts are only one step Microsoft is reportedly taking to become more competitive. Two additional incentives will help manufacturers of Windows products, according to Bloomberg sources. First, the company will apparently not require products that use the cheaper licensing to complete logo certification, which verifies hardware compatibility. In addition, new devices would not be required to be touch-screen compatible. 

Similarly, sources told The Verge that Microsoft would have Windows 8.1 on non-touch PCs automatically boot to the desktop interface instead of the tiled Start Screen. This move should please traditional mouse and keyboard PC users, whose reaction to tiled screen has been mixed at best. There’s even speculation that this latest move by Microsoft could lead to a new low-cost version of Windows 8.1 for PC makers to help fight off adoption of Google’s Chrome OS. Only time will tell if all these changes will help Microsoft grow in this hyper-competitive space. 

At the time of this writing, Jim Probasco had no position in any mentioned securities.

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