Windows 8 Adoption is Looking Lackluster
RJ is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
According to a report from Net Applications, Microsoft’s (NASDAQ: MSFT) Windows 8 adoption is not off to a great start. As of December 22, Windows 8 accounted for approximately 1.6% of total computer usage compared to 2.2% Vista obtained at a similar time after launch and well behind Windows 7’s 5%+ usage rate.
Is it time to call Windows 8 a bust? We aren’t going that far, but unless we see a substantial increase in usage in the first quarter of calendar 2013, it looks like Windows 8 will not be an immediate success. Although the operating system represents Microsoft’s first foray into desktop/tablet integration, consumers aren’t nearly as excited as the company had predicted. Most enterprises have indicated little interest in switching away from Windows 7, and we think the more-clunky point-and-click interface will keep large enterprise customers on the sidelines. Microsoft will end support for Windows XP in April of 2014, but we wouldn’t be surprised to see the enterprise flock to the more familiar Windows 7. For most business customers that use machines for email, word processing, Excel, and other programs, switching to a touchscreen won’t benefit productivity. However, we think touchscreens could benefit marketing and advertising employees that work on design, potentially boosting Windows 8’s market share.
At the end of the day, Microsoft’s OEM partners simply aren’t making products thrilling enough to captivate a PC user, which has become enthralled by tablets, smartphones, and Apple (NASDAQ: AAPL) products. We noted earlier that Apple was one of the few companies to grow PC sales in a market that meaningfully contracted, and we expect this trend to continue. Apple charges a significant premium to other OEMs, and such premium pricing has little impact on demand. We wouldn’t be surprised to see Microsoft follow this model, even after sales of the Surface languish.
Though Microsoft’s Windows business remains challenged, we are optimistic about the firm’s enterprise business. We aren’t throwing in the towel completely for Windows 8, but as with the Surface, it looks poised to fall short of expectations. Apple, a constituent of our Best Ideas Newsletter, is beating Microsoft in every facet of the consumer business. Still, we think the total return profile for Microsoft remains attractive, and we hold the name in the portfolio of our Dividend Growth Newsletter.
Valuentum holds shares of Apple and Microsoft in its actively managed portfolios. RJ Towner owns shares of Apple. The Motley Fool owns shares of Apple and Microsoft. Motley Fool newsletter services recommend 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!