The rise of tablets and smartphones has shaken up the once dominant “Wintel” PC paradigm. In an attempt to re-establish its supremacy, Microsoft designed Windows 8 to be a hybrid operating system, useful on a variety of platforms.
But Windows 8 adoption has been poor -- consumers seem baffled by the changes. Meanwhile, Windows tablets are selling poorly, and Windows Phone remains in fourth place. Can Microsoft turn things around, or should the company cut and run?
Windows 8 has failed
Microsoft released Windows 8 last October. The new version of Windows was the biggest redesign of the operating system since Windows 95. Unfortunately, consumers seem baffled by the changes, and Microsoft’s hardware partners have been public in their disappointment.
It’s hard to quantify consumer dissatisfaction with Windows 8, but a quick perusal of the comments section of nearly any article dedicated to the operating system reveals widespread dissatisfaction.
“I found a wonderful fix for Windows 8,” Robert McAdams commented on one of my previous blogs. “I deleted it and downloaded Windows 7.”
Browsing user reviews of laptops on Amazon reveals much the same. The top review on this budget Toshiba laptop states clearly, “I highly recommend if a person can go with another windows [operating system] installed on your computer.” Another reviewer offers a backhanded rebuttal: “Windows 8 is not as bad as they say.”
Meanwhile, Windows 8 has failed to generate the kind of PC sales Microsoft’s hardware partners were expecting. Acer’s president remarked that Windows 8 was “not successful” and Samsung blamed the struggles of its Ultrabooks on the “less-competitive Windows platform.”
Windows Phone is falling further behind
As Windows 8 struggles on PCs, Windows Phone 8 isn’t doing much better. According to comScore, Windows Phone represents just 3.1% of the total smartphone market in the US, behind BlackBerry, Google’s Android and Apple’s iOS.
This data was for the quarter ending Jan. 31, and thus doesn’t take into account BlackBerry’s new lineup of BB10 devices. The Z10 and Q10, along with Samsung’s Android-powered Galaxy S4 and a likely updated iPhone, should keep Windows Phone in fourth place in 2013.
No one is buying Windows tablets
Likewise, Windows tablet adoption has been tepid, to say the least. Back on March 15, Bloomberg reported that, until that point, Microsoft had only sold about 400,000 Surface Pros, and just over a million Surface RT tablets.
Other hardware makers haven't had much success either. In fact, Samsung told CNET it planned to avoid making Windows RT tablets for the foreseeable future.
Hope for Microsoft
That said, there’s still hope for Microsoft. I wrote back in December that I wouldn’t short the Windows maker then, and I still wouldn’t now.
Despite its failings with Windows, the company has Office, a software suite that Microsoft is turning into more and more of a cloud product every year. In 2010, Microsoft rolled out Office Web Apps -- a dumbed-down, cloud version of Office. The 2013 version of Office -- Office 365 -- has become as web-friendly as ever, and has embraced a subscription model.
At some point, it seems inevitable that Office will become a full-fledged cloud program paid for with a subscription. When that day comes, Microsoft should find plenty of eager customers on a variety of operating systems.
Then there’s Xbox. Microsoft looks to be slowly turning its video game console into a dedicated entertainment hub. All eyes seem to be focused on Apple for TV’s next step forward -- in reality, Microsoft’s Xbox could prove to be the future of smart TV.
Lastly, Microsoft is currently the second-best positioned tech company when it comes to web services. In addition to a cloud-based Office, the company also has SkyDrive, Bing and Outlook. So far, Microsoft has done little with Skype, but the popular messaging and call service could be a potent tool. As cloud computing continues to become dominant, Microsoft’s web services give it an edge for the future.
Put money to work?
But while I wouldn’t short Microsoft, I wouldn’t put money to work either. As it continues to update Windows 8, Microsoft seems committed to keeping the dream alive. Ultimately, the danger is that Microsoft will waste money on Windows in an attempt to keep the operating system relevant. That could mean an underperforming stock.
Rather, if traders want to play to play the decline of Windows, it would be best to do so through Microsoft’s partners Nokia and AMD .