This morning I awoke to an article that suggested Apple Inc. (NASDAQ:AAPL)’s plans to offer free software upgrades to customers amounted to a declaration of war against Microsoft Corporation (NASDAQ:MSFT). Looking at the reach of both companies and their stock prices, it’s tough to view today’s announcement as a declaration of war, because Apple Inc. (NASDAQ:AAPL) has already won the war. Perhaps a more accurate analogy would be to suggest that Apple Inc. (NASDAQ:AAPL) has launched a battle on a different front; a battle that Microsoft is still winning: the battle of the operating systems.
Apple Inc. (NASDAQ:AAPL)’s iPhone and iPad sales have changed the company since each of them were unveiled. Last year, Apple reported $156 billion in revenue, from this only $3.5 billion came from software and services. That’s just 2.2 percent of total sales. Apple seems to now view this number as a pittance and is ditching the model that they’ve worked on for years, upgrades in the neighborhood of $129 for new operating systems and a productivity package (iWorks) that cost over a hundred dollars as well.
Today, Apple Inc. (NASDAQ:AAPL) announced that it would offer both new OS upgrades and iWorks free of charge. One can only imagine that it feels that it may sell more laptops and desktops that are considerably more expensive than similar products running Windows, if there is no additional charges for software. This IS a shot at Microsoft Corporation (NASDAQ:MSFT), who still charges quite a bit of money for the newest OS. An upgrade to Windows 8 will cost most PC users around $100 and accounts for a large chunk of Microsoft’s revenue.
Apple Inc. (NASDAQ:AAPL) will continue to sell Final Cut Pro and Aperture, but those will for the most part be the only remaining Apple software products with a price tag.
Apple software upgrades
This sea change will see more Apple users switching to the new OS X, Mavericks, in the opinion of Tim Cook. Since the release of iOS 7, 64 percent of all devices have been upgraded in less than a month, and one must imagine that there are a number of people who will download the upgrade the moment a jailbreak is available. It is ”the biggest and fastest software upgrade ever,” according to Apple Inc. (NASDAQ:AAPL)’s CEO.
That ubiquitous changeover to new software, whether on Apple Inc. (NASDAQ:AAPL)’s mobile devices or its computers, is a powerful weapon. It allows developers to target their software almost immediately for the new OS, simplifying code writing and further encouraging the stragglers to upgrade. Contrast this with Microsoft Corporation (NASDAQ:MSFT)’s situation, which has a nearly even split between the fairly recent Windows 7 and the ancient Windows XP. Windows 8 barely registers, sitting at just over 5 percent as of July. Developers like writing for what’s new and hot. On Macs, that gives them an audience proportionally much larger than what Windows offers.
Apple Inc. (NASDAQ:AAPL)’s decision to make these easy-to-get upgrades also free is something of a shot at Microsoft Corporation (NASDAQ:MSFT)’s penchant for charging customers for additions.
It’s hard to see businesses making a wholesale shift to Apple Inc. (NASDAQ:AAPL), but some may give it some thought if they are growing weary of paying for Windows upgrades.