Microsoft Rips a Page From Android's Playbook, Blows the Tablet Market Wide Open

New Microsoft CEO Satya Nadella has picked a path to the future, following a trail blazed by Android. Good move!

Apr 3, 2014 at 7:30PM

Microsoft (NASDAQ:MSFT) is not a big name in mobile computing today. Sure, the company made its own line of Surface tablets running Microsoft Windows, and Nokia (NYSE:NOK) has long spearheaded Redmond's smartphone push. But sales of Surface tablets and Nokia smartphones have not been stellar. Microsoft holds a minuscule 0.7% market share of real-world mobile Web traffic. The real action is between Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG), whose mobile iOS and Android platforms add up to a soul-crushing 90% share of tablet and smartphone browsing.

But new Microsoft CEO Satya Nadella is willing to do whatever it takes to turn that mobile frown upside down. Just to get started, he's ripping a page from Google's playbook.

Running Microsoft's Windows software on smartphones, smallish tablets, and some embedded devices will cost nothing, starting right now.

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What's in the bag? The future of smartphones, if Satya Nadella gets his way.

That's the word from Terry Myerson, Microsoft's head of Windows and Windows Phone development. Speaking at a developer event in San Francisco on Wednesday, Myerson said Windows licenses will be 100% free for phones and for tablets with screens smaller than 9 inches wide. Moreover, a planned Windows version for embedded devices will also be free in order to boost the company's stature as the Internet of Things market takes off.

Now, this is not a massive change for smartphone builders who often get juicy discounts that take all the software costs out of developing a device. But it's big news for the tablet market, and a totally unexpected lunge at the nascent Internet of Things sector.

As a reminder, the Internet of Things is where machines talk to other machines, often getting business done for their human masters without direct human control. It's also known as the Industrial Internet, or simply as machine-to-machine communications. Industry leaders see this becoming a $14.4 trillion annual market by 2020, with the potential to dwarf the economic impact of the Internet you're using today.

Microsoft's new mobile strategy is a carbon copy of Google's Android plan and a far cry from Apple's need to charge for everything. Add in the announcement of free Microsoft Office apps for the Apple iPad, and Redmond's transformation becomes obvious.

The new Microsoft is abandoning the traditional model of selling software packages at a high up-front cost. Sure, that's a proven business model -- but it's also getting outdated.

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This platform wants to power the Internet of things. Now it has a chance.

Instead, Microsoft is becoming more like Google. Big G has always made its best consumer-grade applications available for free -- Gmail, the Google Drive online office suite, and Google Search spring to mind. Google still makes money via premium upgrade options, and with high-quality advertising tucked into the corners of the free products.

Enterprise sales won't be moved by free Windows licenses, but both consumers and small businesses will have another low-cost mobile alternative to the burgeoning Android platform.

There's a bit of delicious irony involved, since Microsoft receives royalty checks for many Android installations as a result of successful lawsuits and settlements. Redmond is likely to use this fact to promote its unencumbered alternative: "Windows is more free than Android!"

And due to the extremely high volume of devices involved, this is pretty much the only way to grab a slice of the enormous Internet of Things pie.

Nadella has picked his path, and it's a smart one. In fact, I'd call it the right one.

For the first time in forever, I'm starting to feel good about Redmond's future. The new CEO gets the new era of computing in a way that Steve BallMer would never have allowed.

Good move, Satya. I'm downright excited to see what else you have up your sleeve.

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Anders Bylund owns shares of Google. The Motley Fool recommends Google and Apple. The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days.

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