The PC market is shifting to tablets, and Windows 8 hasn't helped yet

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Microsoft's last minute move to sell Surface RT tablets from retail outlets instead of just Microsoft stores doesn't seem to have made much of a difference, at least according to one analyst.

Microsoft likely only sold 1 million Surface tablets in the calendar fourth quarter, UBS analyst Brent Thill wrote in an investor note, according to Business Insider. He was expecting double that.

Combined with slow PC sales, that means he's cutting expectations for Microsoft. With slow PC sales likely to continue, he cut revenue expectations for the current calendar quarter and for Microsoft's fiscal 2013. For the year, he's now expecting $79.6 billion down from $80.8 billion.

A declining interest in PCs, combined with a growing interest in non-Windows tablets, are Microsoft's biggest problems right now.

Gartner this morning reported that 90.3 million PCs shipped worldwide in the fourth quarter of 2012, a decline of nearly 5 percent over the previous year. They say it's not just a weak economy to blame. PC users are shifting usage to tablets instead of replacing old PCs, Gartner said.

"Whereas as once we imagined a world in which individual users would have both a PC and a tablet as personal devices, we increasingly suspect that most individuals will shift consumption activity to a personal tablet, and perform creative and administrative tasks on a shared PC," Mikako Kitagawa, principal analyst at Gartner wrote in a report. "Therefore, we hypothesize that buyers will not replace secondary PCs in the household, instead allowing them to age out and shifting consumption to a tablet.” 

This is bad news for Microsoft since people are buying iPads and Android tablets rather than Windows devices. Analysts estimate that Apple sold around 20 million iPads in the final quarter of 2012.

But there are some reasons to hold out hope. The Surface Pro, which should hit the shelves this month, could drive better sales for Microsoft. The Pro, which can run any existing Windows software, will be more attractive for some than the Windows RT version (Samsung recently decided against selling a Windows RT tablet in the U.S. because of its murky prospects). But the Pro has its own downsides, including a steep price tag and less battery life.

OEMs could still come out with more innovative Windows 8 machines. So far many have simply rolled out the same hardware as Windows 7 or their more interesting designs have been in short supply.

And there's one more reason to hold out hope for Microsoft: apparently teens no longer think Apple's cool. Too bad they don't have enough money to actually buy a Surface Pro.

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