Does Microsoft need to pay hundreds of millions in subsidies to make Windows 8 a hit?

Windows 8 may not jumpstart stalled PC sales unless Microsoft pays hundreds of millions of dollars to subsidize the sale of touch-enabled PCs. So says a market research firm, and I think they're on target.

Canalys Research reports that Windows PCs accounted for only 73% of combined PC-tablet sales during the second quarter, the lowest percent of combined sales ever. The report noted that sales of tablets was up 75% compared to a year ago. It then said:

Windows PC shipments continued to disappoint. Ultrabooks have not hit the price points that could excite large numbers of buyers and the share of the overall market taken by Windows fell to a new low of 73%.

The report also warns that because Windows 8 is designed more for tablets than PCs, "users will only benefit fully from the new OS if they buy PCs with touch screens, which will significantly increase the purchase price."

Given how much less expensive tablets are than PCs, and the surge of tablet sales while PC sales stall, it's not likely that people will turn out in droves for an operating system on non-touchscreen PCs that's designed for touchscreens.

Canalys suggests that in order to pump up demand for PCs, Microsoft should bring down the price of touchscreen PCs by subsidizing the manufacture of touch panels:

Canalys recommends that Microsoft helps its OEMs hit mainstream price points for Windows 8 touch-screen products, for example by subsidizing touch panel production costs by $50 to $100 per unit, to kick-start the market. Intel pledged to invest $300m in Ultrabook ecosystem players, but there is no indication, as yet, that Microsoft is prepared to make a comparable commitment to the PC supply chain.

It would be the right move for Microsoft. Windows 8 works beautifully on touchscreen devices and combination touchscreen-keyboard devices, but it feels awkward on traditional PCs. There's really no reason to jump from a Windows 7 to Windows 8 PC if you don't have a touchscreen. With the touchscreen, there's a reason. And so subsidizing sales of touchscreen PCs might be what Microsoft needs to breathe new life into Windows.

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