Race to the Bottom

Microsoft has a smart new CEO, but this is a move which stinks of flop sweat:

Citing people familiar with the matter, Bloomberg reports Microsoft will slash Windows licensing fees by 70 percent for low-cost hardware manufacturers in an attempt to regain marketshare lost to devices running iOS, Android and Chrome.

Under the supposed pricing scheme, OEMs will pay $15 to preinstall Windows 8.1 on devices that sell for less than $250. The fee is down from a traditional rate of $50 per device. Further, Microsoft will not impose restrictions on hardware size or form factor as long as the final product meets the required low retail price.

The problem isn’t the OEM’s slim-to-none margins — although they are a problem and lower licensing fees will help. The major problem though comes in two parts.

• Microsoft has failed time and again to adapt to mobile

• As a result, Microsoft’s licensing model has fallen apart

Cutting prices for a product few people want — which isn’t even sold directly to people — does nothing to make them want it. You’ve got to fix the product.

TANGENTIALLY RELATED: BlackBerry is moving downmarket, too.