At an event meant to feature its latest iPad tablet computing devices, Apple on Tuesday took aim at one of the biggest and seemingly unassailable businesses of its rival Microsoft - the Office software for tasks like word processing and spreadsheets.
Apple said iWork, a set of applications for Macs, iPads and iPhones that essentially duplicates what Microsoft's Office offers customers, would be free to anyone who bought a new Macintosh computer or mobile device from Apple. Each Apple app used to cost $10 apiece. The latest version of the Macintosh operating system, Mavericks, will also be free.
The pricing manoeuvre was perhaps the lone surprise at an Apple new media event here at the Yerba Buena Center for the Arts. As expected, Apple souped up its iPads with faster processors and zippier internet connections. (CLASH OF THE TINIES)
The company upgraded its iPad Mini, the smaller tablet, with a higher-resolution, 7.9-inch display. The full-size iPad, with a 9.7-inch screen, was renamed the iPad Air, because it has a slimmer design and has lost some weight. The smaller iPad starts at $400 and the bigger will cost $500. Both will ship in November.
"This is our biggest leap forward ever in a full-sized iPad," said Philip W Schiller, senior vice-president for marketing at Apple.
With its free software offering, Apple is capitalising on strong growth in tablet computing sales and Microsoft's reluctance to offer Office for the iPad.
Tablets are devouring the PC market, which has long been Microsoft's playing ground. About 120 million tablets were shipped in 2012, nearly seven times as many as in 2010, when the first Apple iPad was released, according to market research company Gartner. IDC, another research company, predicts sales of tablets will surpass those of PCs in the fourth quarter of this year and on an annual basis in 2015.
So far, Microsoft has had little success in that growing market. Its attempts to sell tablets have been failures, and Windows 8, which it has marketed as a software system for tablets and PCs, has got a chilly reception.
What's more, Microsoft still charges $120 for people who want to upgrade from the older Windows 7 system to Windows 8.
That shift to mobile devices and low-cost software was why Microsoft was trying to shift from being a traditional software company into one that sold internet services and devices, said Ross Rubin, an independent consumer technology analyst for Reticle Research. The company could reduce the upfront price for its software and charge people more over time for the services through subscriptions. And with the release on Tuesday of Microsoft's new Surface tablets, the company is more aggressively marketing the online services available for it, like SkyDrive, a service for storing files on the internet.
Microsoft CEO Steven A Ballmer had recently said his company would bring a version of Office to the iPad and other touch devices, but the company has not said when that would be. It sells an annual subscription to Office 365 on other devices for $100 a year.
Asked about Apple's decision to give away its iWork apps, Heather Knox, a spokeswoman for Microsoft Office, said in a statement that a web-based version of Office was the best free alternative to Microsoft's traditional Office applications. "They extend the Office experience you know and love with anytime, anywhere online editing and collaboration," Knox said.
The new iPad Mini also gained a high-resolution retina display. The new tablet costs $400 - $70 more than the previous iPad Mini. But Apple said it would continue to sell the older iPad Mini without a retina display for $300.
The iPad Air is about 20 per cent thinner than the previous iPad and weighs one pound, down from 1.4 pounds. Both new iPads will include new chips, called A7 and M7, which Apple introduced last month in its latest high-end iPhone. The A7 is a faster processor with a new architecture that makes it better at multi-tasking. The M7 is dedicated to sensing movement, which could allow for new capabilities in software or games that incorporate motion, like a car-racing game.
The iPads have an improved antenna system for faster Wi-Fi connections. These will come in white and silver and in black and grey, similar to the colours of the iPhone 5S (though the iPads will not come in white and gold like the iPhone). The iPad Air goes on sale on November 1 but the new Mini will ship later in November.
The new iPads do not include the fingerprint sensor technology, TouchID, that Apple introduced in the iPhone 5S. Analysts say that might be because parts are in limited supply, as the iPhone 5S is selling very quickly.
The Mac computers have taken the back seat of Apple's business but the company also released upgrades for some of its Mac hardware on Tuesday. The MacBook Pro notebooks with retina displays are now thinner and faster, with better battery life. The 13-inch version will cost $1,300, down $300 from its original price, and the 15-inch model will cost $2,000, down $200 from the original price.
Apple also said the high-end Mac desktop computer, the Mac Pro, which was introduced in June, would begin shipping in December, for $3,000.
Apple, with about a 32 per cent share, is number-one in the tablet market, according to IDC. But the company faces fierce competition from companies like Amazon, Samsung and Google, whose tablets undercut the iPad in price. Samsung, the second-biggest tablet maker, is quickly gaining traction, with 18 per cent of the market in the second quarter, compared with 7.6 per cent in the period a year earlier, according to IDC.
Smartphones are still more popular than tablets: Gartner predicts manufacturers will ship one billion smartphones and 184 million tablets this year.
But Carolina Milanesi, an analyst for Gartner, said she expected smaller tablets to continue gaining in popularity as the smartphone market became saturated.
"We expect this holiday season to be all about smaller tablets as even the long-term holiday favourite - the smartphone - loses its appeal," she said.