Last Friday, longtime Microsoft reporter Paul Thurfott reported that one of his "most trusted sources" at Microsoft told him early sales of Windows 8 are not meeting Microsoft's internal expectations. This source blamed lackluster adoption by PC makers, and Thurrott added his own speculative reasons, like the confusing messaging about Windows 8 vs Windows RT and the "two-in-one" desktop/touch interface.
Single-sourced stories should always be taken skeptically -- somebody might have had political or personal reasons to leak or spin the information.
But Thurrott's report added weight to the lukewarm comments HP's Todd Bradley had about the operating system last week -- for instance, Bradley told CITEworld he expects Windows 8 adoption to have a "slower ramp" than past upgrade cycles "because touch is such a big piece of it" and said, "if you look at retail orders, what we built with touch related to Windows 8, touch is a small percentage of that."
Then today, Computerworld reports, analyst Brian White of Topeka Capital Partners said that channel checks of Asian manufacturers saw a slower rate of order growth in October than in previous years. Usually, with a new Windows release, the opposite happens -- PC makers place more orders in anticipation of higher demand.
It's early days. Windows 8 has been on sale for less than a month. And Microsoft does not plan its Windows business to spike or goose revenues for a single quarter, or even a year. Windows is a long play, meant to respond to sweeping market changes and keep the entire PC upgrade cycle rolling for years.
Even so. Sometimes where there's smoke, there's fire.
So what if the reports are true and Windows 8 continues to have weak sales for the next quarter or two? What happens next? Here's a likely series of events:
- Enterprise customers get an "out" on the new UI. Windows 8 has a lot of great enterprise features under the hood, but those benefits are blunted by the fact that all PCs -- even ones without touch screens -- require users to boot into and spend a lot of time in the new interface. That interface offers no clear usability benefits on non-touch devices, and will probably require retraining. Microsoft could make Windows 8 much more appealing to enterprises by letting them bypass the new UI and boot directly to the desktop in certain scenarios -- for instance, on non-touch devices, or whenever a convertible is docked or used in "laptop" mode. Microsoft could offer this feature in a service pack for Windows 8 Enterprise Edition or through the Microsoft Desktop Optimization Pack (a set of technologies available to Windows customers who purchase Software Assurance, a guaranteed upgrade plan).
- Windows 7 remains the standard for many years. This is precisely what happened when Vista met with a lackluster reception. In April 2008 -- about 18 months after the release of Vista -- Microsoft announced it would let PC makers keep selling XP on very cheap PCs all the way through the one year anniversary of Windows 7. (Even after that, consumers could find ways to downgrade, and many enterprise customers bought downgrade rights as part of their license agreements.) Look for a similar announcement next year.
- All energy turns toward fixing bugs and soliciting apps. Windows 8 was a major release, and sets Microsoft up to be ready as the computing market turns more and more toward touch and away from the keyboard-mouse paradigm. Now, the focus of the Windows group will be on fixing the most obvious shortcomings -- like the built-in Mail and People (contacts) apps, which are worse than their Windows Phone counterparts -- stamping out any bugs, and getting developers to build new-style touch apps for Windows. Don't look for another groundbreaking release of Windows any time soon.
- Surface gets more competitive. At an event at the Churchill Club in Silicon Valley last week, Steve Ballmer made it sound like the purpose of Surface was to spur OEMs toward building new hybrid devices -- not to make a big play for the hardware business like Apple. For instance, he said that the OEMs are doing "great work" and that they would still build the lion's share of PCs. In fact, this is classic Microsoft. It builds hardware to move the PC market forward, not because it loves the hardware business. When it wanted to promote the Windows GUI, it built keyboards and mice; when it wanted to promote wireless home networking, it built its own Wi-Fi router. But if these early reports are true, it looks like PC makers will need a lot of spurring before they get on board with Microsoft's vision. If need be, Microsoft can drop prices and keep experimenting with new hardware form factors until it has a hit -- at which point the OEMs may have no choice but to follow fast.
There are other moves that are harder to predict.
In particular, Windows RT -- the ARM-based version of Windows 8 -- is a riddle. How serious is Microsoft about continuing this part of its business? If the first Windows RT devices don't sell well, will Microsoft keep at it, perhaps using its ARM license to make its own chips and continuing to build those into its own hardware, as Galen Gruman at Infoworld suggests it should do? Or will Microsoft return its full focus to full backward-compatibility offered by Intel chips, which is beloved by enterprises and has been Microsoft's core strength for many years, and cede the "pure" consumer tablet market to Apple and others?
Whatever the case may be, Windows and the PC are not dead. If nothing else, Microsoft and partners will sell hundreds of millions of PCs next year -- even if most of them are running Windows 7.
But Windows 8 isn't going to revive the PC market and stop the iPad overnight either.