Is Microsoft Snowing Us on Windows 8 Sales?

by Brad Moon | November 29, 2012 11:26 am

Following the Oct. 30 release of Microsoft‘s (NASDAQ:MSFT[1]) Windows 8 — billed as its most important operating system release in years — things didn’t exactly go smoothly, and there were rumblings the company was disappointed in the launch.

However, Microsoft just released information to the contrary.

According to Computerworld, Windows marketing head Tami Reller has put the number of Windows 8 licenses sold since launch at 40 million[2] — a faster rate than its predecessor, Windows 7. Sounds good, but considering the lead-up and initial reactions to the OS, it’s worth asking whether some marketing shenanigans.

The Build-Up

Two months before the launch, Microsoft abandoned “Metro”[3] — the name it had used to describe the new tablet-inspired Windows 8 interface — due to a trademark dispute. The gaffe — coming so close to the critical date — was embarrassing, undid months of press coverage on the Metro interface and caused scrambling among partners who had used the heavily promoted Metro name in marketing material and on products.

In July, Gabe Newell — the influential cofounder of $3 billion PC video game developer Valve and online video game distributor Steam — was quoted in Forbes[4] as saying:

“I think Windows 8 is a catastrophe for everyone in the PC space. I think we’ll lose some of the top-tier PC/OEMs, who will exit the market.”

On Sept. 25, five weeks before launch, the CEO of Intel (NASDAQ:INTC[5]) — Microsoft’s biggest ally in the Windows PC hegemony — went on the record as saying Windows 8 was buggy and not ready for release[6].

Within four days of launch, 4 million PCs had been upgraded to Windows 8; however, compare that to Apple’s (NASDAQ:AAPL[7]) OSX Mountain Lion (released two months earlier). Paid downloads of Apple’s new operating system surpassed 3 million within four days[8] of launch. Considering that Apple’s percentage of PC market share is in the single digits, having the latest and greatest Windows OS outsell Apple’s OSX by a mere 33% at launch was a little humiliating. To proportionately match Apple’s rate of adoption, Microsoft would have had to move closer to 40 million copies of Windows 8.

Then, on Nov. 12 (less than two weeks after launch) Windows chief Steven Sinofsky abruptly left the company[9], reportedly fired by Steve Ballmer. Although Sinofsky’s departure might not have been directly related to Windows 8’s reception, the timing of the event further tarnished the company’s image and added to the perception that all was not right with Windows 8.

Instead of providing the expected big boost to its stock price, the three weeks following the Windows 8 launch saw MSFT retreat 6%.

What’s in a License?

Clearly, Microsoft has reason to want to turn things around … thus, the announcement about moving 40 million licenses. It was time for some good news.

But what does the figure really mean?

Selling 40 million licenses doesn’t necessarily translate into 40 million PC users running Windows 8. Many of those licenses might be associated with unsold computers sitting on retailers’ shelves; they might be in sealed packages yet to be picked up by consumers.

Tech companies frequently play variations on this game. Both Samsung (PINK:SSNLF[10]) and Research In Motion (NASDAQ:RIMM[11]) have been burned in recent years when the vast quantities of tablets they claimed to have sold turned out to have been shipped to retailers. In Samsung’s case, 2.3 million Galaxy Tabs it reportedly sold turned into a measly 37,000 in the U.S. (the world’s largest tablet market), leaving 2 million claimed sales unaccounted for[12] and presumably sitting in warehouses somewhere.

According to Microsoft, Windows 8 sales are outpacing Windows 7. Compared to another previous release — 2002’s disastrous Windows Vista, which shipped 20 million copies its first month[13] — Windows 8 is also doing well. Mind you, Microsoft was charging $159 for the Home Premium edition of Vista ($299 for the Ultimate version) while it’s only charging $40 for a Windows 8 Pro upgrade download ($70 in stores) … so the cheap price might be aiding  sales, but it also might not be doing much for Microsoft’s bottom line.

Worst of all: In the two days since the announcement, MSFT stock has barely budged.

There’s still hope that the public might pick up on the news and decide that if “40 million others” have taken the plunge, Windows 8 might just be worth buying after all. But investors apparently are unconvinced the “news” is worth noting.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

  1. MSFT:
  2. the number of Windows 8 licenses sold since launch at 40 million:
  3. Microsoft abandoned “Metro”:
  4. was quoted in Forbes:
  5. INTC:
  6. Windows 8 was buggy and not ready for release:
  7. AAPL:
  8. surpassed 3 million within four days:
  9. Steven Sinofsky abruptly left the company:
  10. SSNLF:
  11. RIMM:
  12. 2 million claimed sales unaccounted for:
  13. which shipped 20 million copies its first month:

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