Microsoft Corp. (MSFT) is cutting the price of its Windows software for small tablets, seeking to shore up foundering efforts to combat Apple Inc. (AAPL) (AAPL) in the mobile-computing market, people with knowledge of the matter said.
Microsoft is using the changes to try and get more manufacturers to adopt Windows RT, a version of its flagship software for tablets, said the people, who asked not to be identified because pricing is confidential. The price cuts affect Windows RT for small-sized tablets.
A year after unveiling the first Windows RT machines aimed at eroding Apple and Google Inc. (GOOG) (GOOG)’s lead in the $64 billion tablet market, Redmond, Washington-based Microsoft is struggling. Global device makers such as Hewlett-Packard Co. (HPQ) (HPQ) and HTC Corp. (2498) (2498) are shunning the system, leaving a dearth of RT machines in stores and giving Windows RT less than a percentage point of market share in the first quarter, compared with 40 percent for Apple, according to IDC.
“You need more breadth of equipment manufacturers making the devices, you need lower prices, you need a better selection of devices,” said Wes Miller, an analyst at Kirkland, Washington-based Directions on Microsoft. That’s calling into question “the long-term viability” of Microsoft’s Windows RT strategy, he said.
Microsoft will take pains to drum up interest in Windows RT, the variant of Windows 8 for machines with chips based on ARM Holdings Plc (ARM)’s technology, at Computex, the largest PC-industry conference, which begins tomorrow in Taipei. Nick Parker, who oversees Microsoft’s relationships with computer makers, will tell partners the software maker remains committed to RT in a speech at the show.
While Microsoft hasn’t disclosed the prices computer makers are charged to preinstall the software on tablets, a cut would enable the manufacturers to charge consumers less.
HTC scrapped plans to introduce a full-sized tablet computer featuring RT on concern it will meet with lackluster demand, people familiar with the matter said last week. The device maker also balked at the price of making the machines, these people said. Hewlett-Packard (HPQ), the biggest PC manufacturer, has no plans for an RT device, while Samsung Electronics Co. (005930), which developed an earlier RT tablet before opting not to sell it in many markets, has said it hasn’t decided whether to introduce a successor.
Some PC makers are on board. Dell Inc. (DELL) and Acer Inc. (2353) are working on Windows RT tablets, and HTC is moving forward with plans for a 7-inch device with the operating system, which would benefit from a price cut on Windows for small machines. The only widely available RT machine right now is Microsoft’s Surface.
One year ago at Computex, Asustek Computer Inc. (2357) unveiled a Windows RT device and Toshiba Corp. (6502) showed two prototypes. Toshiba’s products hit hurdles almost immediately, with the Japanese manufacturer canceling its devices in August, citing unspecified component delays.
Four other RT machines have been released aside from the Surface since sales began in October, though the others aren’t in stores “in volume,” Microsoft Windows Chief Financial Officer Tami Reller said in an interview last month. Reller said computer makers continue to look at releasing ARM-based Windows devices.
“They want to hear we’re committed to the ARM platform, which we absolutely are, and they want us to respond to their feedback,” she said. “We are having ongoing good conversations with partners.”
Microsoft wanted to use Windows RT to propel its software into an ARM-based tablet market dominated by Apple’s iPad and devices with Google (GOOG)’s Android mobile operating system. With few models and few sales, Microsoft has been ill-equipped to deal with continued interest in tablets and plummeting demand for Windows personal computers.
Now Microsoft is looking for a second chance for RT.
Dell plans to update its Windows RT tablet, the XPS 10, this year, two people said. The current version has had its price cut to $300 from $450. Neil Hand, vice president and general manager of Dell’s tablet and performance PC business, said the company is working on future products, though he declined to elaborate.
“We’ve found that customers using it are really, really happy,” he said. “There just aren’t enough of them knowing what it is, and why they should use it.”
Acer (2353) will release its first Windows RT model by the end of the year, according to Henry Wang, a spokesman for the Taipei-based company.
Microsoft is also using upgrades to goose demand for Windows RT. These include enabling the operating system to work on smaller devices that can compete with Apple’s iPad mini, Amazon.com Inc. (AMZN)’s Kindle Fire and Google’s Nexus 7. Microsoft has also taken steps to improve Windows RT features, including the e-mail tools it used to replace the popular Outlook, after users complained that it was basic and lacked features.
Microsoft is trying to better train retailers to sell the product and has lifted some hardware restrictions that partners had complained about, Reller said. Last year, Microsoft closely controlled which computer makers could work with which chip sellers on RT machines.
Advances in low-power Intel Corp. (INTC) chips may further boost Microsoft’s tablet prospects even without compelling Windows RT devices, Miller said. A year ago, RT was critical because Intel’s chips weren’t able to provide the battery power and slim devices that could be built using ARM chips.
‘Give Me Outlook’
“If Intel was not successfully moving downstream in terms of cost, performance and battery, it would be a real problem that windows RT wasn’t performing up to expectations,” he said.
More changes and improvements to the RT version of the operating system will be announced as the company begins to talk more about Windows 8.1 in the run-up to its Build developer conference in late June.
Nvidia Corp. (NVDA) Chief Executive Officer Jen-Hsun Huang said he wants Microsoft to include a version of Outlook that works on RT.
“Give me Outlook and I’ll use it every day,” said Huang, whose company makes chips used in Microsoft’s Surface RT and other RT devices. The executive said in March that he’s disappointed with sales.
Several PC makers, meantime, are content on the RT sidelines. Hewlett-Packard has no plans to produce an RT device, according to a person familiar with the company’s plans.
Toru Ohara, a spokesman for Tokyo-based Toshiba, said “the company continues considering, watching the situation in the market.”
Samsung said in a statement that it “will decide based on the consumers as well as the market needs, but nothing has been decided yet.”