Microsoft cash cow getting squeezed

[NEW YORK] Apple's giveaways are a jab at Microsoft. Mac users won't have to pay to upgrade to the latest operating system, the company said at its event on Tuesday. Those who buy a new product won't pay for work software like spreadsheets or creative photo and movie packages - on the device or in the cloud. In short, Apple, like Google, is training users to expect software to be free. For Microsoft, that's a problem.

The iPhone and iPad maker uses software to sell premium hardware, so its approach makes sense. Macs are pricier than entry-level PCs. And the company led by Tim Cook is forgoing only a small chunk of revenue. Even including the hugely popular iTunes with its paid-for content, software and services accounted for less than 10 per cent of the company's revenue in the first nine months of the year. Those already sold on the advantages of Apple's products will get a slightly cheaper meal. Having all the software thrown in may also attract new customers.

Google started this fire with its free Android operating system for mobile phones as well as its calendars, word processing capability and other online software. Google's method is slightly different - it uses advertising sales to subsidise the creation and distribution of these programs. But from their different angles, both the search giant and Apple are well on the way to making sure users get used to free software.