Microsoft Said to Speed Windows Upgrades to Once a Year

Microsoft Corp. (MSFT) plans to overhaul how it develops the flagship Windows operating system in a strategic shift aimed at keeping pace with nimbler rivals Apple (AAPL) Inc. and Google Inc. (GOOG), people familiar with the matter said.

Microsoft aims to upgrade the software more frequently, about once a year, rather than every two or three years as it’s done in the past, said the people, who asked not to be identified because the product plans are private. The company plans to unveil the first of these updates in 2013, one of the people said.

The world’s largest software maker has floundered as personal computers, where it has long dominated, have lost ground to the smartphones and tablets championed by Apple and Google. The new approach could help Redmond, Washington-based Microsoft respond to industry changes and integrate new technologies more quickly.

U.S. retail sales of PCs running Windows have declined 21 percent since the company released the latest version of the operating system, Windows 8, according to a report by NPD Group Inc.

The decrease has been fueled by a 24 percent drop in sales of notebook computers as many customers opt for Apple’s iPad or tablets powered by Google’s software instead of Windows, NPD said. The report compared sales from Oct. 21 to Nov. 17 of this year to the same period of 2011. It was based on a sampling of retailers and excluded Microsoft’s own stores, where the company’s Surface tablet is sold.

Photographer: Stuart Isett/Bloomberg

Microsoft aims to upgrade the software more frequently, about once a year, rather than every two or three years as it’s done in the past. Close

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Photographer: Stuart Isett/Bloomberg

Microsoft aims to upgrade the software more frequently, about once a year, rather than every two or three years as it’s done in the past.

Shares Fall

Microsoft shares fell 1.2 percent to $26.62 at the close in New York, making it the worst performer in the member-weighted Dow Jones Industrial Index. The stock has gained 2.5 percent this year.

The company yesterday said the Intel Corp. chip-based version of the Surface will cost $899 for the cheapest model, not including the tablet cover with a built-in keyboard that is one of Surface’s key features. That raised concerns among analysts that the price may be too high for many users.

Microsoft hasn’t yet figured out whether the new, more frequent upgrades will be offered for free, or for a low price to current customers, said one of the people.

Catherine Brooker, a spokeswoman for Microsoft, declined to comment yesterday. The plan was reported earlier this week by The Verge.

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

Photographer: George Frey/Bloomberg

Customers shop for laptops running Microsoft Corp. Windows 8 operating systems at a Best Buy Co. store in Orem, Utah. Close

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Photographer: George Frey/Bloomberg

Customers shop for laptops running Microsoft Corp. Windows 8 operating systems at a Best Buy Co. store in Orem, Utah.

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