Beating The Dead Horse That Is Microsoft Windows (Part 1)

on July 18, 2013
Reading Time: 8 minutes

Few people enjoy beating a dead horse more than I do, but man, beating up on Microsoft Windows is simply no fun anymore…because everybody’s doing it.

The defining company of the PC era — which for the purposes of this discussion we’ll consider the 25 years from 1981 to 2006 — has not articulated a unique and compelling vision for the future of computing since the iPhone rocked it to its core in 2007. ~ Tom Krazit, Gigaom

Yup, that about sums it up.

The first part of this two-part series will focus on what’s gone wrong with Microsoft Windows. Next week, I’ll conclude the series by focusing on why Microsoft is in this position and what, if anything, they can do to resuscitate the dead horse that is Windows.

Let Me Count The Ways

So, exactly how badly is Microsoft losing in the personal computing space? Let me count the ways:

1) PCs are in decline;
2) Mobile is ascendant;
3) Windows Phone 8 sales have been disappointing;
4) Windows RT sales have been disappointing;
5) Microsoft Surface sales have been disappointing;
6) Third-party Windows 8 tablet sales have been disappointing;
7) Ultrabook sales have been disappointing;
8) Windows 8 adoption has been disappointing;
9) Microsoft App Store growth has been disappointing;
10) Business and Enterprise is moving on without Microsoft’s products or services;
11) Microsoft has lost its monopoly and its monopoly powers; and
12) Microsoft is dependent upon legacy products – Windows and Office – for the bulk of its profits.

No reasonable person is arguing that Microsoft is going away. What rational people ARE contending is that Microsoft is becoming irrelevant in the front end – the consumer facing portion – of the personal computing space.

How did it come to this?

1) PCs Are In Decline

If you don’t cannibalize yourself, someone else will. ~ Steve Jobs

Evidence of the PCs decline is indisputable and, frankly, no one is trying to dispute it.

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Dropoff in PC Sales Is Accelerating and Tablets Are the Culprit, Says IDC

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In mature markets, the PC is saturated. And that’s where tablets are secondary devices. Shim says in emerging markets tablets are going to be primary devices. If the tablet takes off there, that kills the traditional PC’s chances of ever growing again.

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…for the 4th quarter PC sales declined by almost 5% according to Gartner research, and by almost 6.5% according to IDC. Both groups no longer expect a rebound in PC shipments, as they believe homes will no longer have more than 1 PC due to mobile device penetration, a market where Surface and Win8 phones have failed to make a significant impact or move beyond a tiny market share.

In the model IDC used to forecast the 7.8% decline, the second quarter — which ended June 30 — was to be down 11.7%, a smaller drop than the first quarter’s historic 13.9% plunge. Shipments in the third and fourth quarters, meanwhile, would decline 4.7% and 1.6%, respectively, from the same periods in 2012.

2) Mobile is ascendant

“The best way to predict the future is to invent it.” ~ Alan Kay

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Half of U.S. adults now own a tablet or smartphone, Pew study finds

…mobile devices — in particular iOS and Android — will continue to cannibalize PC sales throughout the year. Put simply, consumers and enterprise buyers prefer to spend their money on post-PC devices rather than on PCs.

Next year, tablet sales will beat notebook sales for the first time ever, says NPD’s DisplaySearch. It is projecting tablet shipments of 240 million units versus notebook shipments of 203 million units. That’s 64 percent growth for tablet versus a 5 percent decline for notebooks.

IDC: Tablets to outsell notebooks in 2013, all PCs in 2015

The latest prediction from NPD DisplaySearch shows just how quickly the market has changed. It was six months ago, in July 2012, that the same organization predicted that it would take until 2016 for tablets to surpass notebook shipments.

3) Windows Phone 8 sales have been disappointing

I wish developing great products was as easy as writing a check. If that was the case, Microsoft would have great products. ~ Steve Jobs

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Source: Ben Evans

iOS and Android comprised 92.3% of Q1 2013 smartphone shipments

According to Murtazin, Microsoft’s royalty fees from licensing the Windows Phone OS to manufacturers like Nokia, HTC (2498) and Samsung (005930) are being given back to these companies in the form of marketing dollars. In Nokia’s case, an arrangement similar to the one Murtazin describes is a matter of public record, as per the company’s 2011 annual report

Windows Phone gets no traction despite the Nokia deal and RIM’s collapse

Manufacturers reportedly ignoring Windows Phone due to OS fees… and Nokia

Rumor: Microsoft paying $100,000 to some Windows Phone app makers?

You won’t help shoots grow by pulling them up higher. ~ Chinese proverb

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4) Windows RT sales have been disappointing

It is perfectly monstrous the way people go about nowadays saying things against one behind one’s back that are absolutely and entirely true. ~ Oscar Wilde

…Gottheil dubbed the RT tablets a “meta-tweener,” a “tweener between a tweener (Windows 8 x86) and a pure tablet like iPad,” he said. … “I don’t think Windows 8 RT can be successful unless and until its price is much lower.”

Microsoft slashes Surface RT prices by $150 as it flounders against Apple’s iPad

Lenovo released one of the few PCs that ran Microsoft’s ARM-based Windows RT operating system last fall with the 11 inch Yoga 11 notebook-tablet hybrid. Now it looks like Lenovo is phasing out its lone Windows RT product, as it no longer sells the Yoga 11 on its own website.

5) Microsoft Surface sales have been disappointing

To change and to improve are two different things. – German proverb

Microsoft’s Surface Experiment Has Fallen Flat

“Perfection is the goal we’re going for, and that perfection comes with trade-offs,” said Panos Panay, general manager of Surface.

The above statement is “perfectly” ridiculous.

Someone at Microsoft needs to invest in a dictionary.

6) Third-party Windows 8 tablet sales have been disappointing

Bad engineering is solving a problem that you didn’t have in a way that you don’t understand.

…(A)t a time when buyers seems price-sensitive, Wu finds the $500 to $1200 price tags slapped on Windows 8 hardware to be “uncompetitive” when compared to Android with prices as low as $99, and the iPad mini which starts at $329.

Windows 8 tablet sales have been almost non-existent, with unit sales representing less than 1% of all Windows 8 device sales to date, NPD said, excluding sales of the Windows Surface tablet.

Windows 8 device sales have not met Redmond’s internal projections, and the company is blaming it on lackluster hardware from OEMs.

7) Ultrabook sales have been disappointing

Imitation is a good servant, but a bad master.

In October, IHS iSuppli downgraded its estimate of 2012’s ultrabook sales, cutting its projections by more than half from 22 million to 10.3 million, citing too-high prices. iSuppli argued that sales won’t take off until prices fall toward the $600 bar, perhaps in 2013. … The problem for Microsoft is that the outlook for ultrabooks, which the Surface Pro emulates, is dim. Windows ultrabook sales have been disappointing this year, and show little sign of improving sans dramatic price cuts.

NPD: Apple’s MacBook Air dominates with 56% of U.S. thin-and-light notebook market

8) Windows 8 adoption has been disappointing

I heard that if you play a Windows 8 CD backwards, you’ll get a satanic message. But the most frightening thing is that if you play it forward, it installs Windows 8.

The Windows 8 Sales Data Is In, And It’s Bad News For Microsoft

Windows 8 continues to fail

Windows 8 Is Failing to Beat Windows 7… And XP… And Even Vista!

Worse still, Windows 8’s month-over-month growth rate is lagging further and further behind Vista’s dreadful 2007 adoption numbers. When comparing the operating systems when they were first launched, Windows 8’s adoption rate in its first month trailed Vista by just over half-a-percent among PC buyers. Now, in their 8th month out, Vista’s market-share numbers now lead Windows 8 by 3.64 percent. Needless to say, both lag far behind XP and Windows 7’s numbers at similar points in their product life-cycle.

How bad are Windows 8 sales? In April 2013’s Net Applications numbers, Windows 8 barely crept up to 3.82-percent. That still leaves Windows 8 behind Microsoft’s last operating system flop, Vista, after seven months in the market. Windows on tablets fared even worse with touch-screen-based Windows 8 devices and Windows RT devices coming in at 0.02-percent and 0.00-percent each. The last was not a typo. The Surface RT is now in the running for worst Microsoft launch ever.

StatCounter’s findings follow a similarly worrying report from NPD this week, which found that Windows 8 had captured just 58% of all Windows device sales since its launch, while Windows 7 captured 83% during the same period.

9) Microsoft App Store growth has been disappointing

“There comes a time in the affairs of man when he’s got to take the bull by the tail and face the situation.” – W.C. Fields

App-Growth-by-Platform

In a classic chicken-and-the-egg conundrum, the Windows Store needs more Windows 8 customers and Windows 8 customers need more worthwhile apps from the store. Microsoft has failed miserably at attracting compelling content, a painful fact for any developer — or software company — thinking about committing the resources to bring a Metro app to market. How bad is it? … In short, it’s a wasteland.

Microsoft expected 100,000 Windows 8 apps in 90 days. It took 248

Sources: Microsoft Is Paying Developers Up To $100,000 To Write Windows Phone 8 Apps

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Windows 8 users are turning to apps, on average, 1.52 times a day. Breaking this down by type indicates that tablet users are the heaviest app users, launching them 2.71 times per day, while touch-screen notebook users launch 47 percent more apps than those on a standard notebook. … Desktop users make the least use of Modern apps. … Soluto crunched the data further, and took a closer look at those who launch fewer than one Modern app a day. Here, the company noticed that a staggering 60 percent of users launch an app less than once a day. Even when it comes to tablet users, the heaviest users of Windows 8 apps according to Soluto, 44 percent of those sometimes go a day without launching an app.

10) Business and Enterprise are moving on without Microsoft’s products or services

If you’re in a card game and you don’t know who the sucker is, you’re it. ~ Anonymous

Gartner: By 2014, Apple will be as accepted by enterprise IT as Microsoft is today

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Thanks To BYOD, Apple Invades The Enterprise

More Data Showing iOS, Especially The iPhone, Still Killing It In The Enterprise

Why companies are still deploying iOS apps first

Fortune 500 Companies Moving to iPad Hits 94%

Apple’s iOS still dominated the enterprise mobile circuit with 75 percent of total device activations last quarter.

11) Microsoft has lost its monopoly and its monopoly powers

That which has been believed by everyone, always and everywhere, has every chance of being false. ~ Paul Valery

Forrester Report: Microsoft’s Windows Dominance Is Over

…and Windows is no longer the dominant end-user operating system when PCs, smartphones and tablets are considered.

In the greater end-user market, as Mary Meeker, the well-regarded analyst and venture capitalist, pointed out in her May 2013 Kleiner Perkins Caufield & Byers’ 2013 Internet Trends report, Windows is on the decline no matter how you measure it. Apple iOS and Android now have the lion’s share of computing devices, including PCs, smartphones and tablets, with 65-percent share over Windows’ 35-percent.

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Source

Microsoft’s mobile operating system share is actually worse than it appears. None of its most recent smartphone/tablet operating systems, Windows 8, Windows Phone 8 or RT. even breaks the 0.01-percent mark on NetMarketShare’s mobile/tablet operating system market share chart. How bad it is that? Android 1.6, with 0.01-percent, does make the chart.

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While Microsoft apologists focus on Windows continuing to be the dominant desktop operating system, they keep missing the two elephants in the room: Windows 8 continues to fall behind Microsoft’s previous top operating system failure, Vista, and Windows is no longer the dominant end-user operating system when PCs, smartphones and tablets are considered.

Men occasionally stumble over the truth, but most of them pick themselves up and hurry on as if nothing had happened. ~ Sir Winston Churchill

“We had a little bit different expectations for Windows 8 than previous OS launches,” Jeff Barney, VP and general manager of Toshiba America’s PC and TV business, said. “In the past Windows was the only game in town, when it was Windows 7 or Vista it was the big event of the year. These days it’s a different environment.”

The erstwhile truism You Won’t Get Fired For Buying From Microsoft has lost its luster.

In the consumer market, we expect to Apple to gain share as the younger generation has grown up on Apples at school. … Pretty soon it could be that the ‘rebels’ will be the Windows users rather than the Mac users.

12) Microsoft is dependent upon legacy products – Windows and Office – for the bulk of its profits

There is only one boss: the customer. And he can fire everybody in the company, from the chairman on down, simply by spending his money somewhere else. ~ Sam Walton

Microsoft makes more than 75% of its profits from Windows and Office. Less than 25% comes from its vaunted servers and tools. And Microsoft makes nothing from its xBox/Kinect entertainment division, while losing vast sums in its on-line division (negative $350M-$750M/quarter).

Microsoft uses a licensing model. A licensing model only takes a portion of the total profits from a sale. In a licensing model, volume matters.

If Microsoft can’t move its Windows and Office products and services onto mobile phones and tablets, well…

Next Week

The first part of this two-part series focused on what’s gone wrong with Microsoft Windows. Next week, I’ll conclude the series by focusing on why Microsoft is in this position and what, if anything, they can do to resuscitate the dead horse that is Windows.