The fortunes of the PC industry and Microsoft (NASDAQ:MSFT) have long been interwoven. During the past decade, that hasn’t necessarily been for the best.
Microsoft hopes to shake things up. After a series of ho-hum updates to its Windows operating system, the Redmond-based company is preparing to launch an all-new Windows 8. Rather than its usual approach of evolutionary changes to Windows, the company is releasing an operating system designed to power desktop PCs, laptops and tablets, featuring a radically new user interface.
According to Wired, the promotional budget is in the $1.5 billion-$1.8 billion range. The company has risked alienating longtime industry partners by offering its own line of Windows 8-powered tablets, the Surface, in an effort to boost acceptance. Windows 8 also is expected to address ongoing litigation with the European Commission over Microsoft’s failure to provide a choice of web browsers in its Windows 7 operating system. Failure to comply with that ruling could result in a hefty penalty: 10% of Microsoft’s annual revenue. Not to mention, Windows 8’s reception also will be critical for PC hardware manufacturers.
This release is nothing short of huge for Microsoft. And leading up to the launch, there’s some cause for concern.
When Microsoft was previewing its revolutionary new OS approach, the user interface was repeatedly referred to as “Metro.” As ZDNet’s Ed Bott points out, during his keynote at this year’s CES, Microsoft CEO Steve Ballmer used the word “Metro” 27 times. Metro was a big part of the Windows 8 identity.
However, just a few months ago, Microsoft suddenly dropped the Metro moniker and began scrubbing references from code and marketing material, apparently fearful of a trademark lawsuit.
Windows 8 vs. Windows RT vs. Windows Phone 8
One of Microsoft’s goals was to take leadership during the Post-PC or PC-Plus era (which it is depends on your viewpoint) by releasing an operating system that spans devices. Windows 8 would do it all, providing a familiar environment, whether you were using a desktop PC or a tablet.
Unfortunately, this approach has resulted in considerable confusion.
First, there’s Windows Phone 8. Yes, Microsoft has long had a mobile version of its OS, but with lines blurring between smartphones and tablets — and the fact that Windows Phone 8 incorporates that Metro interface used in Windows 8 — not everyone understands that this is a standalone OS specific to mobile phones. They can’t install Windows 8 on their Nokia (NYSE:NOK) Lumia smartphone or Windows Phone 8 on their Surface tablet.
Far worse is the tablet situation. Microsoft has two Surface devices coming to market. They look the same and they both run Windows 8. However, one runs the full-blown (desktop PC) version of Windows 8, complete with the ability to install and run standard Windows software. The consumer-level model (the $499 Surface) uses a different flavor of Windows 8 — Windows RT.
This version of Windows 8 is designed for use on devices using ARM Holdings (NASDAQ:ARMH) processors, and the cheaper Surface tablet is ARM-powered. While it will run a special version of Microsoft’s Office suite, users can’t install standard Windows software on a Windows RT device; instead, they buy and download apps from Microsoft. Basically, the same process as an iPad and Apple’s App Store, except instead of 275,000 tablet-ready apps, Surface owners have around 7,800 to choose from. Thanks to the Metro user interface, though, to the casual user, Windows 8 and Windows RT look visually identical.
If all this sounds confusing, it’s apparently gotten the better of some Microsoft employees, too. AND there’s also Windows 8 Pro and Windows 8 Enterprise to keep track of.
Windows 8’s tiled interface (formerly known as Metro) has won many rave reviews during development, but most of the accolades have come based on demos. Now that the product is finding its way into reviewers’ hands, the feedback is mixed.
While there is praise for the modern approach, many reviewers have found that using the new OS is like learning to use a PC all over again. The familiar “Start” button and dock are gone, replaced by constantly updated graphical tiles. New York Times columnist Nick Wingfield wrote:
“It is as if an automaker hid the speedometer, turn signals and gear shift in its cars, and told drivers to tap their dashboards to reveal those functions.”
While younger users — a demographic that tends to embrace mobile, tablets and graphics over text — generally seem to like Windows 8’s radical new interface, there’s concern that others may not take such a shine to it. Also, corporate IT departments might be wary about adopting a new operating system that could lead to a flood of help calls from confused users.
Windows 8 Launch Stakes Are High
It’s no secret that the PC industry has been hurting. Globally, it’s looking like PC shipments will shrink this year over last — the first time that has happened since 2001. The industry is highly cyclical, but also in turmoil. A solid Windows 8 launch with big numbers is important to Microsoft’s bottom line.
But it’s also critical to hardware manufacturers. If consumers and enterprise users shrug, hold off on Windows 8 and make their existing PCs last a few more years — or invest even more heavily in mobile or even Apple PCs instead — things will get even grimmer for the likes of Dell (NASDAQ:DELL), Hewlett Packard (NYSE:HPQ) and Advanced Micro Devices (NYSE:AMD), among others.
If Windows 8 is embraced, there’s a good chance this will lead to a round of investment in PC upgrades — something the entire industry desperately needs.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.