Windows 8 Sales: Two Flawed Numbers

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Fuzzy Numbers

According to Microsoft (NASDAQ: MSFT), the company sold 40 million Windows 8 licenses in the first month after the OS launched. Microsoft states, “Windows 8 is outpacing Windows 7 in terms of upgrades.” On the contrary, NPD Group reported that PC sales declined by 21% year over year in the first four weeks after Windows 8 launched. However, neither number can be trusted. NPD’s data starts on October 21. Windows 8 launched on October 26. In its press release, NPD states, “Windows 8 initial four week launch sales include the time period of October 21 – November 17.” The five days before Windows 8 launched accounts for about 18% of the total time period. 

NPD’s report has been criticized by Fitch Ratings. In an article titled NPD PC Data May Not be Indicative of Windows 8 Demand Fitch states, “Five days, or nearly 20% of NPD's evaluation period, excluded any sales of Windows 8 PCs since it was not available until Oct. 26. Furthermore, PC demand in those five days was particularly depressed, as consumers postponed PC purchases ahead of the imminent release of Windows 8.”

On the other hand, Microsoft did not break down its data. It is not clear how many of the 40 million licenses Microsoft sold were sold to OEMs. Normally, selling a Windows license to an OEM almost guarantees another license sold to a consumer. However, Windows 8 has a different UI from previous versions of Windows. Thus, actual consumer demand could be completely different from OEM expectations. As a result, Microsoft’s reported number is not a good estimate of the success of Windows 8 either.

Microsoft's Broad Aim

Windows 8, which is both a tablet and desktop OS, is important to the struggling PC industry. In Q3 2012, global PC shipments declined by 8.6% year over year. Hewlett-Packard’s (NYSE: HPQ) and Dell’s (NASDAQ: DELL) PC shipments declined by 16.4% and 14% year over year, respectively. In terms of shipments, HP tied with Lenovo as the largest PC vendor in the world. Dell was the third largest PC vendor in the world (IDC). The decline in shipments are partly due to the rise of tablets and smartphones, which are dominated by Google (NASDAQ: GOOG) Android and Apple (NASDAQ: AAPL) iOS. In Q3 2012, the tablet market grew by 43% year over year (Strategy Analytics). Windows 8 is Microsoft’s response to the rapidly rising tablet market. However, Windows 8 tablets are struggling with availability.

On its site, Microsoft recommends nine tablets. The tablets are from ASUS, Dell, HP, Lenovo, Samsung, and Microsoft. However, a lot of the tablets are only available for pre-order in Microsoft’s store. For example, the HP ENVY x2 has an estimated shipping date of January 15. The Lenovo ThinkPad 2 Tablet has an estimated shipping date of December 31. The ASUS VivoTab has an estimated shipping date of December 14. While not on the list of recommended tablets, Dell’s New Latitude 10 has an estimated shipping date of January 2 according to Dell’s website. Looking forward, it will be interesting to see how well Windows 8 tablets sell in the holiday quarter. On the opposing side, Apple now has five distinct generations of the iPad and the company looks like it has a successful product with its iPad mini. Android is also making moves. In Q3 2012, Android’s tablet market share climbed to 41.3% from 29.2% in the previous year.

To Be Determined

While important, Windows 8 is not a make or break OS for Microsoft. Microsoft allows consumers to downgrade their new Windows 8 Pro PC to Windows 7, which is a good OS for Microsoft to fall back to. Since Windows controls over 90% of the PC market, Microsoft should continue to dominate the PC market regardless of how Windows 8 does on desktops. Also, nearly 80 million PCs shipped in Q3. Even if Windows 8 only sells well on tablets the OS can be considered a benefit to the PC industry because it allows the industry to tap into the growing tablet market. Furthermore, Windows 8 tablets are full PCs and are compatible with legacy Windows programs. Overall, Windows 8 has only been out for a little over a month. The holiday quarter will reveal how unsuccessful or successful Windows 8 has been at reviving the growth of the PC industry.

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