Doing the Right Thing, at the Right Time

Naomi is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Formerly, each time there is an announcement of impending release of a new version of the Windows OS, you'd see a lot of people getting excited and anxiously looking forward to getting a new PC just to have a feel of the new OS. Such was the hype trailing the launch of Microsoft’s (NASDAQ: MSFT) Windows 8 in October, 2012. One month after the release, a report from research firm NPD states that “sales of Windows-powered devices are 21 percent lower than they were during the same time period last year -- October 21 through November 17.”

According to a report from New York Times, “Windows 8, the latest edition of Microsoft’s software, failed to pack shoppers into a Microsoft store in a mall here last week, at a time when parking lots in the area were overflowing. The trickle of shopping bags leaving the store with merchandise was nothing like the steady stream at a bustling Apple store upstairs.”

Although Microsoft claims to have sold 40 million Windows 8 licenses from the date the new OS was released until Nov. 27, this has not in any way translated to a boost in the PC market. In the words of Emmanuel Fromont, President of Acer, American division, “There was not a huge spark in the market. It’s a slow start, there’s no question.” He goes further to attribute the low sales to the unfamiliar design of the new Operating System, which to a large extent is making consumers more cautious.

Even at the claims of Microsoft concerning the sales of Windows 8 OS, Windows 7 has continued to dominate the company’s OS revenues. This goes a long way to prove that number of sales recorded is not the issue here, but that user experience is. 

The major reason why the launch of those earlier versions of Windows resulted in an increase in sales of PCs is mainly attributed to the fact that during those periods, people were still relying heavily on PCs for their computing needs. These days it is no longer about the PC but more about the smartphones and tablets. Little wonder why most of the world’s leading PC vendors were greatly disappointed, since they expected a visible surge in the market with the release of the new OS.

From the viewpoint of A.M. Sacconaghi, an analyst at Sanford C. Bernstein,

“What you’re seeing is not a retirement of PCs, but a push-out in the replacement cycle. If people used to buy PCs every four years and are now buying them every five years, that could lower PC sales by 20 percent over time. That’s substantial.”

He also predicted that “global PC shipments would be down 3 percent in 2012.”

Microsoft did take the right step, but it is just like the case of doing the right thing at the right time. There is no disputing the fact that the new OS is already running on several tablets, but Microsoft made its move too late. It took it all this while to realize that mobile devices are quickly replacing PCs as the core of future computing. An analysis of the Windows 8 system shows that the company is adapting to the shift in computing trends. The new OS comes in a tile-based interface that makes for easier navigation on touch-screen devices.

Although it is encouraging that the company is moving with the trend with the design of the Windows 8, it seems PC owners were sidelined. This has drawn a lot of criticism from various angles. There are speculations, however, that the company intends the software to be flexible, so that it can be conveniently used on conventional PCs as well as the newer models that come with touch screens. I would say the new OS should be given some time to see how it goes, especially considering the fact that it is quiet different from what we used to have and as such, would require some form of learning to get a grasp of its design. Who knows, it might just turn out to be a big hit, if all goes well.

With Microsoft’s launch of the Surface tablet almost at the same time of the launch of the new OS, it came at a time when competing products from Apple (NASDAQ: AAPL), a leader and giant in the mobile device market, are already overshadowing everything else. Apple is currently engaged in talks to buy Waze, a crowd-sourced traffic/navigation app that it hopes would be a source of unique info to cater for the needs of its growing consumers. However, fresh facts are pointing to the direction that Apple might not acquire the app after all. The reason is based on the fact that while the app is holding for $750 million, Apple submitted a ~$500 million bid, with the intention to pay $400 million upfront and an additional $100 million as incentives.

Also leading in the market is Amazon (NASDAQ: AMZN), which has not stopped marveling consumers with its Kindle Fire series. Amazon recently filed a report that showed rapid growth of U.S. third-party sales on the company’s website. The growth was put at 40% YoY during the holidays. This has resulted in an increase in the number of Amazon’s customers, especially as it has to do with the company’s Amazon Prime service. Further reports indicate that holiday shoppers were going more for Apple and Amazon products more than Microsoft’s.

Maybe, just maybe, if Microsoft had done the right thing at the right time, its system would have dominated the mobile device market just like Google’s (NASDAQ: GOOG) Android, the number one software choice of high tech companies that are in need of a cost-effective, customizable, and lightweight operating system. Google’s Android could be facing a stiff competition from the new OS, Tizen, which will be featured on smartphones from Samsung beginning this year. It is believed that Samsung took this initiative in order to minimize its reliance on Android for its mobile devices. With fingers crossed, let’s watch what happens with the Windows 8 and Surface tablet, which I believe should have been launched years ago by Microsoft.

Chizy has no position in any stocks mentioned. The Motley Fool recommends, Apple, and Google. The Motley Fool owns shares of, Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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