Analysis "Everything points to a boom in the landfill business" – The Register, 2012
Are tablets the new netbooks – a flash in the pan? Or perhaps even the new picture frames - a one-season fad?
I don’t think so, but sales are flat, and the numbers look ominous for any global technology company hoping they’ll provide a long-term money spinner. The numbers look particularly ominous for Microsoft, which paid the highest price of all with its response to the explosive growth in tablets.
No other tech company compromised its existing bread-and-butter product in a demented dash to respond. Thanks to Steve Sinofsky, Microsoft ensured Windows was almost unbuyable. And in addition, it began to make hardware – at great expense - that nobody wanted to buy. Although Microsoft has since mended a lot of the damage, some really big decisions lie ahead. The decline in tablets makes the ruinous decisions made between 2010 and 2012 look even dafter now. Microsoft can’t avoid making these decisions for much longer.
First, the numbers. They surely now show a consistent trend. Overall, the volume growth in fondleslabs is tapering off. Apple’s figures show a year-on-year decline in iPad sales, even though Apple’s iPads have never been better. We also appear to have reached “peak Kindle”, at least for now, with falls showing a 47.1 per cent decline in first quarter. (Ebook sales were flat last year at $3bn – so it would appear anyone with an e-reading habit has already caught it).
The explanations offered are all plausible. Once consumers have got a fondleslab, they don’t need to replace them very often. The gadgets rarely leave the house and so they break less frequently, and are shown off less frequently. Nor do you need to upgrade a tablet to the latest and greatest specs, if you’re using it mainly for Facebook and Netflix or iPlayer. The other factor is that smartphones have become bigger – with even Apple rumoured to be following suit.
The Android flagships today – such as the Galaxy S5, HTC One M8, LG G3 and Sony Xperia Z2 – are not “phondleslabs” but all have fairly stunning 5-inch displays. And these are packed into smaller form factors – with smaller bezels than before.
What growth there is to come in tablets – as we suggested last week - will belong to no-name commodity manufacturers running bog-standard Android.
This is good news for Chinese manufacturers (many of which we’ve never heard of) as they can crank out reasonable quality at rock bottom prices. But eventually, this is not a game an HP wants to be in, as the market becomes like the perfume market. The R&D spending on what’s in the bottle is minimal, but huge expenditures are required to maintain the brand. That’s how Casio stays in – by the skin of its teeth – and the tablet biz is soon going to look a lot like the watch biz.
So much then, for the “post-PC” era. It’s really going to be a smartphone + PC era.
What does this mean for Microsoft? Well, it might be time to hire an exorcist.
Microsoft put Steve Sinofsky in charge of making the company competitive in the “post-PC world” and his strategy now looks like criminal negligence. Of course, hindsight is a wonderful thing, but the gamble of "brute-forcing" an app ecosystem into existence by plastering it on top of Windows didn’t look very clever at the time. It now looks like all cost, and no gain.
Sinofsky borrowed the approach that radical environmentalists (and the Bush administration) had used: an existential crisis was upon us, and normal rules of engagement, such as rational cost-benefit analysis, were to be suspended. Apps were everything, and Microsoft needed to do everything to force developers to write to the Metro (or Modern) apps. That way, Microsoft would bludgeon its way to becoming the "third ecosystem".
Essential to this was turning PC Windows into a weird kind of hybrid. But in the execution, it was all about appearance, and developers needed to write an app three times for each of the three Microsoft "Modern" platforms.
Write once, run anywhere on desktop, RT or Phone was the goal. Many of us thought it was a bluff: that Microsoft wouldn’t actually ultimately launch a PC version of Windows whose user experience was so utterly awful. But Sinofsky, by now almost unmanageable, went ahead and tried it anyway. It didn't work.
When Microsoft made Windows unattractive, the cost was immense. The company has lost billions in revenue by losing out on the upgrade cycles which power the PC industry. It lost billions more making boutique own-brand hardware which nobody wants. And its partners have lost twice over: by losing core PC sales and by making tablets which are even harder to sell.
UK figures this week show Microsoft sold around 10,000 slate-style tablets last quarter, out of almost 600,000 sold overall. That’s the size of a rounding error – and comparable to the number of ruggedised PCs it was selling into enterprises before Windows 8.
If you want a practical demonstration of why the Sinofsky “hybridised” Windows is a flop, watch this nine-minute YouTube review of the Surface Pro 3 I caught recently.
Do give it a few seconds to adjust to the presenter's whiny voice - it’s actually a well-observed and quite devastating review of why hybridised even with brilliant just doesn’t work. Even with sexy design and some really clever hardware engineering, it's cumbersome compared to a simple combo of laptop and smartphone. This is a hybrid the world just doesn’t need.
Hopefully, a fresh reappraisal of the tablet market at Redmond will refocus the software strategy – and Microsoft is already halfway to ditching the Sinofsky Hybridisation Strategy completely. It already looks as if Windows 9 will restore some sanity. Universal apps are now a reality.
One response is to continue to improve the tablet Windows (Intel and ARM) and give it away for nothing, as it’s already partially doing. (Microsoft already has zero royalty licensing for small tablets and Windows Phone). The fear was always that tablets would cannibalise Windows licence royalties, but there’s less to fear now. Continue Modern as a kind of overlay on Windows, but not one that compromises the experience.
Perhaps the one positive of the Sinofsky legacy – one that didn’t receive enough credit at the time - was porting a lightweight Windows to ARM. It created a bloodbath for ODMs who risked creating ARM Windows tablets running Windows RT – and several never even brought those to market.
Only Microsoft and Nokia (now part of Microsoft) have released RT devices in the past year. Yet it forced Intel to raise its game considerably, and the downstream effect is that Windows laptops have much better low-power performance than they might otherwise have had. Late last year Microsoft acknowledged it had created “one Windows too many”. With phones becoming larger, it's more important that Windows Phone becomes richer, and that's where the focus appears to be going.
So Microsoft should hire the exorcist and flush out any remaining vestiges of Sinofsky's hybrid strategy. Then, it should pour itself a large drink. The future isn't going to be as bleak as it thought. ®