Microsoft needs to figure out how to get its hardware and its OEMs hardware prices inline with Apple. If MS and their OEMs put pressure on manufacturers they'll no longer be able to offer the same discounts to Apple.
OEMs, VARs, volume licensing holders already pay close to this price for windows and make up the bulk of purchases. Making Windows available to retail at ~$40 will not have a significant impact on revenue.
Not dealing with Apple's competitive prices on phones and tablets will spell death for MS. MS at this point could give a shit about cannibalizing Windows retail upgrades for desktop operating systems. The key is to leverage their desktop OS, developer base and corporate relations into something thats competitive in mobile and tablets.
Also, I'm under the impression MS charges OEMs much less than the retail price for Windows licenses. I doubt they're taking much of a loss, if any.
It's mostly power users that that take the pain to upgrade OSes(risking breakage). Most regular users seem to think the upgrade is not worth the hassle of things breaking.
I've seen this attitude even in enterprises. The OS(and even Office) is almost never upgraded on the same machine, but if you get a new machine, it comes with the latest Windows and Office(provided it's compatible with the apps/network etc.).