Apple Sucker Punches Microsoft: Mac OS X Mavericks and Other Software Now Free

To anyone who took the day off yesterday and/or crawled out from under that cozy rock that's kept you isolated from the Internet, welcome back to the online world. You didn't miss a whole lot. Surface 2 and Surface 2 Pro became available in 21 markets, and Nokia launched its first Windows tablet. Oh, and Apple rebooted its iPad family, though not before turning technology writers on their collective heads and spinning them dizzy by announcing it would not charge a dime for Mac OS X Mavericks for Macs or for iWorks for the new iPad Air and second generation iPad mini, which will come with the productivity suite pre-installed.

The resulting headlines are varied, but the content is mostly the same. It seems the general consensus among tech savvy journalists is that Apple's sudden decision to offer its operating system and productivity software to users pro bono is going to disrupt Microsoft's way of doing things and shatter the Windows business model. It's been called a new era, and Microsoft now looks like a dinosaur on the verge of extinction for having the gall to charge for software. In a few years, we'll all be running Mac Pros at work and using iPad Airs at home, and driving luxury cars with the money we saved by not having to purchase core software anymore, right?

iMac with Mavericks

Not so fast. I'm not trying to begrudge Apple for giving away its OS or iWorks software, but I do think some perspective is in order. Prior to yesterday's announcement, Apple was still charging for core software, but not much. The previous version -- Mac OS X 10.8 Mountain Lion -- was a $20 upgrade. In essence, Apple just slashed $20 off the price of its OS, which doesn't sound like much of a game changer, and that's because it isn't. Let's look at the minimum costs to own an Apple system.

  • 11-inch MacBook Air: $999+
  • 13-inch MacBook Air: $1,099+
  • 13-inch MacBook Pro: $1,199+
  • 13-inch MacBook Pro w/ Retina Display: $1,299+
  • 15-inch MacBook Pro: $1,999+
  • 21.5-inch iMac: $1,299+
  • 27-inch iMac: $1,799+
  • Mac Pro: $3,999+

You're still paying anywhere from $999 to over $3,999 for a traditional Apple machine. The value proposition of a free OS is much more intriguing on a Mac mini starting at $599, but again, it's only a $20 savings compared to the price prior to yesterday's press event. That's hardly a disruptive force.

The other reason why I don't think this is a huge deal is because Windows users are notoriously clingy. According to StatCounter, over 72 percent of the world's computer-using population are still running Windows XP or Windows 7; a little less than 8 percent are using Windows 8. Dating back to at least the Windows XP era, it's fair to say that most Windows users continue to run the OS that came with their system until it's time to buy a new computer.

Further proof is found in Microsoft's financial report(s). In 2012, the Redmond software giant raked in over $19 billion in revenue from Windows sales, and almost two-thirds of that came from OEMs. The OEMs then pre-load Windows onto new systems and sell them to the public at various price points.

Toshiba Satellite

A quick peek at Best Buy's website reveals that one of the lowest cost Windows 8 laptops that's not refurbished is right around $266. In fact, there are several models selling for less than $300. Apple giving Mavericks away doesn't do anything to change that Windows systems are dirt cheap to begin with. If Joe Budget has $500 to spend on a new computer, he still can't afford an Apple system even though the OS is free.

What's far more interesting to me is Apple's decision to pre-load iWorks on new iPad models and Mac computers, versus continuing to charge $10 for each of the three included apps (in other words, a $30 savings). Microsoft blinked when it came to releasing a version of Office of iPad, and Apple capitalized by undercutting its rival's offering before it even exists. There was potential there for Microsoft to cash in on iPad users, and that opportunity has now largely passed, though it's worth pointing out that iWorks isn't free for existing iPad and Mac users.

In any event, let's not lose our heads over what just happened. Again, I'm all for Apple giving away product and services, but let's not go crazy here and start writing Microsoft's obituary because Apple decided to make a $20 OS free, and a $30 productivity suite free for select users.