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Google Has Picked Microsoft's Low-Hanging Fruit

NEW YORK (TheStreet) -- Microsoft (MSFT - Get Report) may be nearing a free Windows 8 release if recent rumors are true. "Windows 8.1 with Bing" is an upcoming free version that Microsoft may be targeting at current manufacturers now installing Google's (GOOG) Chrome.

A free scaled-down version of Windows does follow a recent pattern to position Microsoft software on a level playing field with Google's myriad of free offerings. A few weeks ago, Microsoft announced several new budget-priced hardware partners in Asia including ZTE, Gionee, Longcheer, and Xolo. Microsoft also stated that Windows Phone 8.1 will allow the phone makers to operate Windows 8.1 on current Qualcomm (QCOM) powered Android hardware.

In order to effectively compete against a free Android operating system in the budget arena, Microsoft must sell Windows Phone software incredibly cheap or give it away for free, and that's precisely what some are saying Microsoft intends to do. The upside to handing out free copies of operating systems is it allows for greater revenue and profit through app sales that would otherwise go to Google. Another key objective is to enable Microsoft to maintain, and hopefully build, the critical mass needed for its ecosystem to remain viable. Not everyone thinks Microsoft can pull it off.

TheStreet's Rocco Pendola believes Google and Apple will put Microsoft out of business within 10 years. I don't share Pendola's pessimism and actually think Microsoft is a strong candidate for investors wanting to buy and hold for dividend income.

That said, Microsoft is taking the gloves off to defend its territory from further erosion. Google's overall game plan to migrate users from Microsoft is easy to articulate. Offer services that are almost as good or in some cases better than Microsoft's and give it away for free.

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