Random posts on all sorts of things designed to inform and provoke.
Despite the underwhelming sales of its new Windows 8 Operating System (OS), Microsoft Corporation’s (MS) vast dominance over the global personal computer (PC) market is unlikely to abate anytime soon. This isn’t good news for the Washington State-based company because the PC market is shrinking rapidly thereby making MS a big fish in a dwindling pond. Consequently, the corporation is walking a tightrope between maintaining its near monopoly in one market while trying to enter and succeed in another business.
Windows 8 was supposed to be a bridge between these two worlds. The expectation from this OS was that it would reverse downward trending PC sales while giving the company a foothold in the mobile computing market. Following the October 2012 release of Windows 8, a number of technology analysts have assessed that MS has failed on both these fronts. I, however, don’t agree but rather believe that Windows 8 is a decent, but not exceptional, first step into a rocky market for a company as it tries to find its way between the two worlds.
Let’s first consider the shrinking PC market: sales for PCs fell another 6.4 percent in the fourth quarter of 2012. Expecting an OS to halt this trend – as was expected from Windows 8 – was clearly an overreach.
The system did aid MS though, as its release reversed a four-quarter long decline and helped increase Windows sales by 24 percent. Regardless of this increase, sales of Windows 8 have been disappointing. Even companies such as Hewlett-Packard have admitted that sales have been “slower” and the numbers have not matched those from when previous Windows versions were released.
In addition, while MS has publicly said that it sold 60 million units between October and December 2012, this number is based on licenses sold to vendors and not systems installed by end users. One indication that the latter number is significantly lower comes from recent reports that MS is blaming computer-makers for not displaying the true potential of the systems’ touchscreen capabilities by not adhering to their recommendations.
Consequently, while sales for Windows, Office and Xbox rose by 3 percent, MS’ net income for its fiscal second-quarter fell by 4 percent. These figures include those for the Surface tablet which is MS’ first self-designed mobile computing product and whose statistics were not released separately but are projected to be below expectations. This is the bigger disappointment because it adds on to the poor sales for the company’s other mobile product, the Windows Phone – sales in that division fell 11 percent from a year ago.
Future sales for Windows 8 look to remain static for the immediate period as the product’s price will increase after January 31. Furthermore, consumers will likely need some time to get used to the new interface before adopting the product.
The mobile market presents a bigger challenge because, while MS’ phones have received excellent reviews, they lag behind their competitors in applications – the absence of Facebook and Twitter apps for example. In addition, analysts are reporting that the mobile phone market is reaching a plateau, making this a bad time for a new entrant.
MS’ advantage lies in the crossover ability of its products as an individual can talk and work on their Windows phone and tablet and then get on their PC at home or work and continue working in Office 2013. MS should use this advantage – which its competitors lack – to increase sales in both PC and mobile industries.
There is a long way to go, to be sure. A direct and laser-like focus on increasing the number of mobile applications will make the MS products more attractive while increasing the reliability of Surface will resolve a number of user complaints. Finally, it may be a good decision for MS to provide discounts for joint sales of its products thereby allowing for easy transferability of customers.
The challenge facing MS is in its relatively late entrance into an already crowded market while its advantage is in its enormous cross-market share. The path that it chooses, however, will entirely be its own.