SAN FRANCISCO – Microsoft Corp is to give away its Windows operating system to makers of smartphones and small tablets as it seeks to make more of an impact on those fast-growing markets and counter the massive success of Google Inc's free Android platform.
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Microsoft's move, announced at its annual developers conference in San Francisco, is an attempt to broaden the small user base of mobile versions of Windows, in the hope that more customers will end up using Microsoft's money-making, cloud-based services such as Skype and Office.
Up to now, Microsoft has charged phone and tablet makers between $5 and $15 per device to use its Windows system, as it has done successfully at higher prices for many years with Windows on personal computers. Hardware makers factor the cost of that into the sale price of each device.
That model has been obliterated in the past few years by the fast adoption of Google's Android system for phones and tablets, which hardware makers quickly embraced and now accounts for more than 75 percent of all smartphones sold last year. Apple Inc's iPhone and iPad account for most of the rest of the mobile computing market.
By contrast, Windows-powered phones held only 3 percent of the global smartphone market last year. Windows tablets have only about 2 percent of the tablet market, according to tech research firm Gartner.
Microsoft's move to make Windows free for some devices bucks a central tenet of Bill Gates' original philosophy, that software should be paid for, which led to Microsoft's massive financial success over the last four decades. But analysts said it is a realistic reaction to the runaway success of free Android.
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"Microsoft is facing challenges on the mobile and tablet fronts and need to change their strategy to move the growth needle, this is a good and logical first step," said Daniel Ives, an analyst at FBR Capital Markets.
It comes a week after new Microsoft Chief Executive Satya Nadella unveiled new versions of Word, PowerPoint and Excel applications for Apple Inc's iPad. A year's free subscription to Microsoft's cloud-based Office 365 service will be offered on the new devices running the free Windows, Microsoft said.
The recent moves show that Microsoft is now more interested in gaining market share for its cloud-based services on any platform or device, rather than its traditional approach of putting Windows at the center of everything it does and extending its influence from there.
In the new era of mobile computing, Nadella acknowledged Microsoft's underdog status.
"We are going to innovate with a challenger mindset," said Nadella in a question and answer session at the developer conference. "We are not coming at this as some incumbent trying to do the next version of Windows, we are going to come at this by innovating in every dimension."
(Reporting by Bill Rigby; Editing by David Gregorio and Andrew Hay)