Windows 8 Adoption: Not a Disaster

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While some investors believe that Windows 8's adoption rate has been a disaster for the PC industry, the numbers show that Windows 8 is having a decent start. In the holiday quarter, Microsoft (NASDAQ: MSFT) sold over 60 million Windows 8 licenses. If that is not convincing enough, numbers from Microsoft’s main competitor, Apple (NASDAQ: AAPL), provide additional proof.

Outperforming the Mac

In its earnings release, Apple reported that it sold 4.1 million Macs in the holiday quarter. In comparison, the company sold 5.2 million Macs in the same quarter of the previous year. That is a decline of 21% year over year in units sold. However, Apple’s quarter was only 13 weeks versus 14 weeks for the previous year. Using average Mac sales per week, Apple’s unit sales of Macs declined by approximately 15%.

In comparison, according to research firm IDC, in Q4 2012, global shipments of PCs declined by 6.4% year over year. While a year over year decline is not good, the overall PC industry, which is dominated by Windows, significantly outperformed its biggest desktop competitor, the Mac. The number of PCs shipped by top PC vendor Hewlett-Packard (NYSE: HPQ) was almost flat for the quarter. The company shipped over 15 million PCs in the quarter and posted a decline in shipments of just 0.6%.

In Q3, PC shipments were down 8.6% year over year so the rate of decline slowed in the holiday quarter. HP’s shipments declined by 16.4% in Q3 so a decline of 0.6% is a huge improvement. IDC states, “HP continued to defend its top position in IDC's worldwide ranking, recovering somewhat from past weakness in key markets. An aggressive push for Windows 8 volume helped the vendor make gains in Asia/Pacific and its home turf in the U.S.” If Windows 8 was driving customers away to the competition, unit sales of Macs year over year would have outperformed the rest of the PC industry. That did not happen. Also, year over year PC shipments improved from the previous quarter.

Supply constraints and slow adoption

In Apple’s earnings call, Apple CEO Tim Cook blamed part of the decline in unit sales of Macs on supply constraints. While supply constraints do play a significant role, Windows 8 faced supply constraints as well. In particular, there was a lack of available touchscreen Windows 8 devices in the quarter. Many Windows 8 products recommended by Microsoft were only available for preorder with some having delivery dates in January. In Microsoft’s earnings call, Chris Suh manager of investor relations stated, “The consumer segment was most impacted by the ecosystem transition, as demand exceeded the limited assortment of touch devices available.”

Looking at consumer adoption, Windows 8 is on the rise. According to netmarketshare, the market share of Windows 8 PCs in use climbed to 2.26% in the month of January. Using the number from eTForecasts of 1.6 billion active PCs worldwide at the end of year 2011, there were roughly 36 million Windows 8 PCs in use in January. In contrast, three months after launch, Windows 7 and Vista had 7.57% and 3.3% market share, respectively (PCWorld). Thus, Windows 8 adoption is relatively slow. However, a slower early adoption rate is not surprising because Microsoft changed the UI in Windows 8. The most important data is that Windows 8 use is rising. In December, Windows 8 had a 1.72% market share.

The bottom line

Windows 8 is having a decent start. While the adoption is relatively slow, the level is rising and Windows 8 has a different UI from previous versions of Windows. In addition, year over year PC shipments improved from Q3 and outperformed sales of the Mac by a wide margin. Finally, while tablets remain a threat, the tablet friendly UI of Windows 8 allows the PC industry to battle that threat. Overall, Windows 8 provides the PC industry with versatility, which gives it a good chance of being a big success.


iamgreatness owns shares of Microsoft. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple 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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