Windows 8 was supposed to save Microsoft and the desktop. Looks like the verdict is in, and it is not pretty: The new operating system has not reversed the negative trends in the PC market. Quite the opposite, it probably makes it worse.
Things looked very good for Microsoft, in fact the moods were almost euphoric prior to the October 2012 release of Windows 8. In the past, Microsoft and CEO Steve Ballmer have often been accused of chasing the competition and delivering “me too” solutions. This all changed in the run up to the Windows 8 release. Fast, innovative design, better user experience: Microsoft’s plan was to breathe new life into the sluggish PC market.
Scarcely anybody expected the fairly dramatic developments that unfolded since the beginning of the year: the PC market saw the worst drop in its history. According to IDC, the first quarter of 2013 saw the new deliveries of notebooks and desktops drop by nearly 14% to about 76.3 million devices.
This is the most staggering crash on record since 1994 when industry analyst started to track deliveries. “Although the reduction in shipments was not a surprise, the magnitude of the contraction is both surprising and worrisome,” said David Daoud, IDC Research Director, Personal Computing.
One of the surprises was the timing of the drop. In general, the economy has more or less recovered, and we have seen a lot of attractive PC variations come to market. This should have resulted in a net increase of PC sales.
Windows 8 release failed
Gartner Research released somewhat less dramatic numbers. According to experts, the drop in sales is “only” at about 11.2%. However, Gartner analyst Mikako Kitagawa dramatically predicts for the PC market: End users increasingly shift toward smart phones and tablets devices. Not even developing countries will show a strong demand for notebooks and desktops.
Microsoft has not been able to change this trend with Windows 8. Quite the opposite seems to have happened: market analysts for IDC think that the new operating system has made the situation worse. Bob O’Donnell, IDC Program Vice President, believes it is clear that Windows 8 not only failed to provide a positive boost, but also appears to have slowed the market.
“While some consumers appreciate the new form factors and touch capabilities of Windows 8, the radical changes to the UI, removal of the familiar Start button, and the costs associated with touch have made PCs a less attractive alternative to dedicated tablets and other competitive devices,” said O’Donnell. “Microsoft will have to make some very tough decisions moving forward if it wants to help reinvigorate the PC market.”
To date, about 90% of all PC’s worldwide run with a Windows operating system. Of this, the Windows 8 portion is only about 3%.
Microsoft appears to plan a Mini-Surface
The drop in sales is not limited to Microsoft. PC manufacturer Hewlett-Packard (HP) sales experienced about a 25% drop, Acer suffered the worst drop of about 30%. Only the Chinese manufacturer Lenovo has seen stable deliveries. HP barely held on to its top position in the PC market.
Microsoft’s has released the Surface tablet last fall. It appears that they will expand the offering: According to the Wall Street Journal, Microsoft is working on a mini version of the surface.
The device features a 7″ display and goes to production this year. Insiders have disclosed that this was not planned initially, however, with the success of the Goolge Nexus 7 or Apple’s iPad mini this changed. About half of the tablets sold in Q4 2012 were apparently smaller than 8″ display according to IDC analysts.
No success in the tablet market
The weak sales in the PC market has put additional pressure on the Microsoft tablet products. Microsoft has not announced any numbers yet. According to Bloomberg, only 1.5 million Surface tablets have sold in Q1 (middle of March). Additionally, around 400,000 Surface Pro have sold. Microsoft had planned to about 2 million tablets (according to insiders) – not including the Pro variant.
Estimates of IDC put the total sales at about 128 million devices. The Microsoft portion is minuscule. Approximately half of all devices are Apple iPads which makes them the market leader. Google’s Android operating system is catching up. Experts think it possible that it could over take Apple this year. In the smart phone market, Android market share is already about 70%.
Even if Microsoft bets on the tablet market – it is mainly dependent on the success of Windows 8. The company invested a lot of money in development, marketing, and sales. This combined with the weak sales of the Office products, Microsoft’s revenues went down in Q4 2012.
At the end of January, Steve Ballmer seemed very happy with the launch of the new operating system. However, it is clear now that the expectations were to high in the lead up to the release.