NEW YORK (TheStreet) -- Software giant Microsoft (MSFT) is taking off the gloves in a full frontal assault aimed at Google's (GOOG) Android marketshare in India with free Windows Phone operating system licenses according to Times of India. Microsoft may have Android in its crosshairs, albeit Apple (AAPL), and especially BlackBerry (BBRY) will feel more than a pinch.
Microsoft's Indian pricing shift isn't a small trial concept to test the waters. India is the most populous democracy and at 1.2 billion people will soon overtake China to become the most populous country in the world. Microsoft's success in India will undoubtedly shape its pricing strategy around the world.
Intuitively it may appear Microsoft is surrendering revenue in order to remain relevant as it struggles to increase marketshare above a distant third behind Android and iOS, but Microsoft can monetize software in other ways including sales of apps and ad revenue through search. Give the OS away free and make it up elsewhere is the same model that Google profitably employs. Android is on more than 80% of phones worldwide, and left few options for Microsoft to capture marketshare.
In a yin-yang relationship, mobile operating systems must maintain a critical mass of users in order to attract phone manufacturers and app developers which create user demand. Lose the critical mass and the OS dies. A free Windows Phone OS is a significant step in the right direction to steer clear of the OS death "event horizon".
Caught in the cross-fire is Apple. Apple now has a two-front war to wage. Apple's CEO Tim Cook has stated that the iPhone maker won't target the budget market.
"There's always a large junk part of the market. We're not in the junk business," Cook said. "I'm not going to lose sleep over that other market, because it's just not who we are."
However, Apple has less than a 5% marketshare in India and smartphones are quickly becoming commodity items. As the cost of technology falls, Apple may soon face low-cost, high-quality phones that are "good enough" even if not up to the gold iPhone standard.
I can already hear iFans bemoaning their opinion that Windows Phone software isn't as pleasing as iOS, but even the most ardent Apple fanboys and girls must admit business runs on Windows. If you're not already considering margin headwind for Apple you should be because other investors are.
Microsoft and Nokia's (NOK) partnership ensures a steady supply of high quality desirable phones utilizing the Windows Phone platform. What's missing is the breadth and depth of iOS and Android's app market. A free Windows Phone OS will rectify that shortcoming.
Apple may soon have to do some soul-searching to see where it will fit into the marketplace in three to five years. It has to meet the needs of the market, and as BlackBerry painfully found out the hard way, one or two miss-steps and a company can go from hero to zero faster than a Tesla (TSLA) supercharger can get you back on the road again.
Cook's comments notwithstanding, If Microsoft can have a change of heart in pricing for its software, it's reasonable to believe Apple may do the same if left without a choice. Since Apple already generates sales through apps, unlike Microsoft, Apple will be playing defense to maintain instead of growing sales.
In Google Has Picked Microsoft's Low-Hanging Fruit, I outline why Google's easy days of converting Windows users into Google's ecosphere have come to a close. A free Windows Phone offering goes right to the heart of my thesis that Microsoft has shifted its strategy from OS and software sales to alternative income streams.
For Microsoft investors, this next step in isolation may not immediately appear to be significant, but taken as a whole, the shifting strategy is incredibly bullish. In 3 Dividend-Paying Power Plays for Your Portfolio, I outline once again why Microsoft is a strong dividend stock with growth potential.
Microsoft is growing, but a lukewarm market attitude towards an old-school stock in a space occupied by Facebook (FB), LinkedIn (LNKD), Twitter (TWTR) and others creates real growth value for anyone willing to objectively examine the metrics. Microsoft may not be as sexy as the above social media plays, but that's exactly why it offers a superior risk to reward opportunity. Besides, making money never goes out of fashion.
As disclosed below, I have no position, but after this article is published I intend to put my money where my keyboard is and buy Microsoft for the reasons stated above.
At the time of publication, Weinstein had no positions in securities mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.