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Microsoft Discounting Windows 8 For OEMs to Boost Sales

Both the Wall Street Journal and DigiTimes are reporting that Microsoft has cut the prices of Windows 8 and Office 2013 to boost current lackluster sales.

The Redmond-based company's blocky new operating system is struggling to gain traction since its release back in September 2012 even though the company offered discounted upgrades until January 2013, and launched two branded tablets. Office 2013 just launched in January, but has been plagued with complaints about Microsoft's policy regarding the transfer of the suite from one PC to another.

However, news of a discount is surprising given that the company is typically reluctant to alter its pricing. But, even before the new platform was launched, industry sources said OEMs were worried about the inability to launch multiple devices given Microsoft's hefty licensing fees. By comparison, Google offers Android for free, and likely why HP recently announced an Android tablet rather than one based on Windows RT.

"They've always held [pricing] close to the vest," said Allan Krans, an analyst with Technology Business Research. "They've always been insistent on maintaining that pricing, but a discount makes sense, given the holiday season, the back-and-forth with the OEMs and the slow start to the Surface."

Earlier this week, research firm IDC partially blamed Windows 8 for a projected 1.3-percent decline in PC sales in 2013, saying that an "underwhelming reception" has led to a second-consecutive year of declining PC sales. The decline was even worse in 2012: a 3.7-percent drop from 2011's sales numbers.

Both reports claim that the discounts offered by Microsoft will be on the OEM side. According to the Wall Street Journal, a discount will be applied to a Windows 8 and Office 2013 bundle, cutting between $30 to around $120. The qualifying device must be a PC, or one with a built-in touch screen smaller than 10.8-inches.

As for DigiTimes, unnamed sources claim that Microsoft will knock $20 off the typical $80 or $90 licensing fee OEM's must shell out per PC. This discount will apply to several form factors including desktops and laptops, tablets and hybrid devices with touch screens 11.6-inches or smaller.

Based on the reports, Microsoft is seemingly trying to push devices with touch-based screens by reducing the licensing costs for OEMs. Touch screens are one of the more expensive components which is why so few Windows 8-based devices (outside the tablet and AIO sectors) are up for sale. Touch screen prices are definitely falling, but likely not fast enough for Microsoft, which seemingly depends on the technology to make Windows 8 work as intended.

As Computerworld points out, for a long while the bestselling notebook on Amazon has been Samsung's 11.6-inch Chromebook, which sells for $249. Customers out looking for a similar cutting-edge deals have balked at the prices brought on by Windows 8 notebooks sporting expensive touchscreens.

"If you think about the components in a PC, almost every one has dropped off a [price] cliff," Krans added. "Except for the OS. Microsoft's pricing is their one lever left, the last where it can have a big impact on PC prices."

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