Microsoft Windows 8 is totally killing the PC market. As if PC shipments weren't already stagnating, Windows 8 just knocked unit volumes down for the count.
The 14% decline in the first quarter that IDC estimated is the worst quarterly contraction in nearly 20 years. There were initial indications that Windows 8 wasn't taking off, such as when IDC pegged fourth-quarter PC units at negative 6.4%. The new operating system was released about a month into that quarter, so it was fair to say then that Windows 8 maybe just needed some time. It was simply too early to call it for sure.
Well, we can now call it for sure: Windows 8 has bombed. Don't just take my word for it. IDC's Bob O'Donnell makes it quite clear:
At this point, unfortunately, it seems clear that the Windows 8 launch not only failed to provide a positive boost to the PC market, but appears to have slowed the market. While some consumers appreciate the new form factors and touch capabilities of Windows 8, the radical changes to the UI, removal of the familiar Start button, and the costs associated with touch have made PCs a less attractive alternative to dedicated tablets and other competitive devices. Microsoft will have to make some very tough decisions moving forward if it wants to help reinvigorate the PC market.
Windows 8 was a huge risk. It was a risk that Microsoft needed to take in the face of lackluster global PC shipments, but after five months on the market, the data show that consumers just aren't buying into Microsoft's vision, literally and figuratively. Users want the Start Menu back; some certified technicians even offer services to downgrade brand-new PCs back to Windows 7 (that'll be $125, please), allowing users to go back to the familiar interface and embrace of that OS.
Should Microsoft just kill Windows 8 immediately in order to minimize the damage it's doing to the PC market? That's not likely, considering how much time and money the software giant plunged into developing it. That would be about the toughest decision Microsoft could make.
This is before we even consider Windows RT, the less-capable variant that doesn't support legacy apps. Surface RT sales haven't made a dent in the market, and many OEMs are already abandoning the platform. Samsung just shuttered Windows RT sales in Europe, which it was using as a testing ground before possibly bringing those devices stateside. Other Windows RT OEMs are already dropping prices to clear out inventory.
Here's IDC's tablet guru Tom Mainelli last month:
Microsoft's decision to push two different tablet operating systems, Windows 8 and Windows RT, has yielded poor results in the market so far. Consumers aren't buying Windows RT's value proposition, and long term we think Microsoft and its partners would be better served by focusing their attention on improving Windows 8. Such a focus could drive better share growth in the tablet category down the road.
IDC is pegging Windows RT growth at less than 3% through 2017, while the overall tablet market is expected to double between 2013 and 2017. At the very least, Microsoft should axe Windows RT. It should probably drop Windows 8, too.
It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In this brand-new premium report on Microsoft, our analyst explains that while the opportunity is huge, the challenges are many. He's also providing regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.
Copyright © 2009 The Motley Fool, LLC. All rights reserved.