Report: Microsoft About to Slash Price of Windows 8.1

Feeling the pressure and the heat, Microsoft MSFT has decided to cut the price of Windows 8.1 by 70 percent for manufacturers of inexpensive computers and tablets, according a report by Bloomberg over the weekend.

The price cut, people familiar with the program told Bloomberg, would help makers of low-end computers and devices be more competitive against rival devices like the Google GOOG 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.

There is no question Microsoft has been losing market share. Both Apple AAPL and Google have taken sales from Microsoft, most recently last quarter when the computer industry as a whole posted its biggest annual decline on record.

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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 cuts 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 our Google and Apple.

Two additional incentives will help manufacturers be more competitive, more quickly, according to Bloomberg sources. First, the company will apparently not require products that use the cheaper licensing complete logo certification, which verifies hardware compatibility. In addition, new devices would not be required to be touch-screen compatible.

The Verge reported that Microsoft had been considering making Windows Phone and Windows RT systems available free to device makers. The reported 70 percent sale price on Windows 8.1 license fees could be a first step in that master plan.

Among several licensing changes that would come with the new pricing structure, 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.

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