Open ... and Shut Once upon a time any problem at Microsoft could be magically resolved with a new Windows release. Since Windows Vista, however, that formula hasn't worked. In fact, according to new sales data from NPD Group, it may be getting worse.
In late 2012, departing Microsoft board member Reed Hastings called Microsoft's Surface tablet "a tactic to spur people on, to get Windows 8 really successful." I derided that strategy, but it looks like I may not have gone far enough.
It's not just that the Surface isn't spurring Windows 8 sales. It's that nothing is. Not even Santa Claus, as NPD Group's holiday report reveals:
Despite the hype, and hope, around the launch of Windows 8, the new operating system did little to boost holiday sales or improve the year-long Windows notebook sales decline. Windows notebook holiday unit sales dropped 11 percent, on par with Black Friday, and similar to the yearly trend, but revenue trends weakened since Black Friday to end the holiday period down 10.5 percent. ASPs rose only $2 to $420. Touchscreen notebooks were 4.5 percent of Windows 8 sales with ASPs around $700. Sales of Windows notebooks under $500 fell by 16 percent while notebooks priced above $500 increased 4 percent. Macbook sales dropped 6 percent while the ASPs rose almost $100 to $1419.
There are a few ways to look at this data. One is to suggest that Windows no longer drives hardware sales. That seems to be a given. Mobile is the category with serious volume, and Windows is still a non-factor in mobile.
Long-time Windows watcher Paul Thurrott, however, sees a different picture in NPD's data. Thurrott argues that Microsoft looked to the lowly netbook to prop up its sagging Windows franchise, back with Windows 7, and is paying the price now:
It’s not pat to say that the Windows PC market went for volume over quality, because it did: Many of those 20 million Windows 7 licenses each month—too many, I think—went to machines that are basically throwaway, plastic crap. Netbooks didn’t just rejuvenate the market just as Windows 7 appeared, they also destroyed it from within: Now consumers expect to pay next to nothing for a Windows PC. Most of them simply refuse to pay for more expensive Windows PCs.
So, not only did Microsoft look to a market savior without the potency to drive real revenue, it also bet on a dying market. The iPad and the rising tablet market have rendered the netbook obsolete, as Kevin Tofel has argued. Microsoft, now planning to end discounts on Windows 8, is unlikely to find a full-freight price tag to be workable in a market that is struggling to care about Windows machines.
What to do?
Hard to say. Microsoft remains strong in enterprise IT and gaming, but it desperately needs to a mobile future, as mobile looks set to eviscerate its Windows and Office monopolies. It also needs to think very differently about Windows, which is why I think the appointment of Craig Mundie to Microsoft CEO Steve Ballmer's inner circle reflects a step backward.
No, I'm not talking about Mundie's history of antipathy to open source. Some of his accusations were correct. But it is Mundie who thinks tablets are something of a fad, among other things. Microsoft has tremendous turf to protect in its Windows franchise, yes. But no, it has no hope of owning the future if it remains so rigidly attached to existing businesses.
I would have hoped to see Microsoft broadly license Office to run on different platforms, including iOS and Android tablets and, why not? Linux desktops, all as a way to milk that monopoly. I'd like to see Microsoft open up development of Windows in important ways as a way to revive interest in the venerable platform.
But the reality is that I can't see much of a future for Windows outside core enterprise infrastructure. Granted, this is a huge market, and things like Azure have a great deal of upside. But I can't see Microsoft giving up on being a visible, omnipresence on the client devices we use at work and play.
Unfortunately for Microsoft, given the sales data for the last few Windows releases, it seems the world is happy to give up on it. ®
Matt Asay is vice president of corporate strategy at 10gen, the MongoDB company. Previously he was SVP of business development at Nodeable, which was acquired in October 2012. He was formerly SVP of biz dev at HTML5 start-up Strobe (now part of Facebook) and chief operating officer of Ubuntu commercial operation Canonical. With more than a decade spent in open source, Asay served as Alfresco's general manager for the Americas and vice president of business development, and he helped put Novell on its open source track. Asay is an emeritus board member of the Open Source Initiative (OSI). His column, Open...and Shut, appears three times a week on The Register. You can follow him on Twitter @mjasay.