Microsoft (NASDAQ:MSFT) stock has rallied on CEO Satya Nadella's new direction for the company, which includes laying off 14% of the existing staff. Yet payroll may not be the only area where Microsoft intends cuts. Pricing for the newest versions of Windows may also see a downgrade, Fool contributor Tim Beyers says in the following video.
According to The Verge, Chief Operating Officer Kevin Turner told attendees at a recent partner conference that Microsoft wouldn't be "ceding the market to anyone" and that low-end PCs have a "great value proposition against Chromebooks."
New numbers cast doubt on that claim. From January to May, Google's (NASDAQ:GOOGL)(NASDAQ:GOOG) Chromebook partners accounted for 35% of portables sold to businesses through distributors and resellers, NPD reports. Consumers are buying, too. As of this writing, four of Amazon.com's top-10 sellers in laptop computers were Chromebooks. One was a Mac, leaving Windows to govern the others. Turner apparently sees that ratio as unacceptable.
Less clear is what steps Mr. Softy plans to take to halt the incursion. Cutting fees on existing Windows licenses would be one option. Another would be to offer rich bundles of Office software to buyers of cut-rate PCs. Either way, Tim says this is beginning to look like a war of attrition.
What should investors do? Watch for details on the plan for Windows 9, which should arrive next year. (Mr. Softy is due to end support for Windows 7 in January.) Also, keep an eye on Surface news. A new convertible aimed at the Chromebook is also a possibility given the bare-knuckles nature of this fight. One, or even a series, of price cuts doesn't amount to a knockout punch.
Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Apple and Google (A and C class) at the time of publication. Check out Tim's Web home and portfolio holdings or connect with him on Google+, Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.
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