Microsoft Prepares to Go Blue
For months, investors have been hearing about a mysterious internal project within Microsoft code-named "Blue." The initiative represents a major shift in the way that Microsoft strategically approaches software updates -- one that's reminiscent of how its rival from Cupertino does things.
Two peas in a pod
For decades, Microsoft's flagship Windows business has seen major upgrades typically every two years, and each time consumers looking for the latest and greatest (without upgrading their hardware) could potentially have to pay over a hundred dollars to get the newest version of Windows. In contrast, Apple pushes out smaller, more incremental upgrades at much lower price points.
The big difference there is that Microsoft is a software business, so the company has always wanted to keep prices as high as possible, whereas the Mac maker sells integrated packages of hardware and software so it could generate its margin elsewhere.
Save the date
Yesterday, the software giant set official dates for its Build developer conference, which will take place in June at the Moscone Center in San Francisco. Microsoft is bringing the battle right to Apple's doorstep, since the Mac maker's own developer conference, WWDC, usually takes place at the Moscone Center in June each year.
Last year's Build conference took place on Microsoft's home turf in Redmond, but the year before was in Anaheim, Calif. Build 2011 was a particularly notable conference, since that was when Microsoft officially unveiled Windows 8 for the first time, giving developers a sneak peek ahead of public release.
The company also finally acknowledged the existence of Blue yesterday, simply referring to the project as a set of plans to advance its devices and services. To date, that's as much official detail that investors have gotten regarding Blue outside of speculation and rumors.
And speaking of speculation and rumors...
The Verge reports that Microsoft is indeed preparing to show off a public preview version of the next iteration of Windows, with sources calling it a "milestone preview" of Blue.
There have been some early leaks on some of the tweaks in Windows Blue (which won't officially be named Blue once it's released), and Microsoft is also building up a handful of new first-party apps. Blue is also expected to implement tighter integration with some of Microsoft's cloud services such as Skydrive. Search will also play a larger role, with the Bing team pitching in.
The price is right?
The biggest unknown and most important aspect for investors will be pricing. The whole idea if incremental upgrades is that they shouldn't cost as much, but Microsoft could make up for this with frequency.
Ahead of the Windows 8 launch, Microsoft had detailed an upgrade promotion for $40 (that has since ended). Buyers of relatively new PCs could get the new operating system for just $15. The company had also reportedly been offering discounts to OEMs to incentivize smaller touchscreen form factors. Those moves show that the software maker is willing to be more aggressive when it comes to pricing.
If investors look at what Apple has been doing on the pricing front in recent years, the iPhone maker has also been getting more aggressive to ensure quick uptake of its latest operating systems. Snow Leopard was priced at $29 in 2009, followed by Lion for the same price in 2011. Mountain Lion was let loose in 2012 for just $20.
Since Microsoft is clearly looking to pursue an Apple-esque strategy with software updates, it stands to reason that $100-plus Windows upgrades may be a thing of the past, and that Windows Blue may only cost $20 to $40 or so.
Coming off the biggest product launch in years, Microsoft could be preparing to pursue an even bigger strategic shift by realigning the product cycle of one of its most important businesses (Windows generated over a third of operating income last quarter).
The uncertainty regarding Blue is a risk factor to Microsoft's flagship product. Will Windows Blue make investors feel blue?
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The article Microsoft Prepares to Go Blue originally appeared on Fool.com.Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.