The PC market continues to stagnate, with researchers Gartner and IDC both showing that Microsoft (NASDAQ:MSFT) Windows 8 is doing little to turn the tide and the broader PC market is suffering for it. Sounds like just about the worst time for a Windows 8 price hike, but that's exactly what's about to happen.
We're talking about Windows 8 upgrades only here, which Microsoft has been offering Windows 8 Pro at a promotional price of $40 since last summer for eligible PCs running Windows 7. The promotion was always set to end on Jan. 31, so interested Windows users should act now while they still can. After that, the Windows 8 Pro upgrade price jumps back up to $200.
With the recent entry of low-cost alternatives to computing like tablets or Google (NASDAQ:GOOGL) Chromebooks, a $200 upgrade to an operating system that's derided as confusing is a lot for the average consumer to stomach. The first generation of Chromebooks weren't viable since they were priced around $500, but the newest batch that start at $200 may be tempting to prospective upgraders.
Upgrades were included in Microsoft's announcement that it has now sold 60 million Windows 8 licenses, just three months after the platform launched in October.
Over the past two quarters, Microsoft has deferred $540 million and $1.2 billion in revenue related to the Windows Upgrade Offer, although the latter figure also includes Windows 8 pre-sales to OEMs. Once the offer closes, the company should be able to recognize some of that unearned revenue that currently sits as a liability on the balance sheet, although Microsoft still typically carries short-term unearned revenue of over $18 billion.
Microsoft is reportedly transitioning its broader upgrade strategy to mimic Apple, which now offers upgrades for as little as $20 without promotions. Except since Apple integrates hardware and software, it doesn't rely on consistent software upgrades for revenue like Microsoft does. That may be why the software giant is rumored to be exploring an annual upgrade cycle with incremental upgrades, codenamed "Windows Blue."
Today's market for computing just doesn't have room for a $200 software upgrade.