Why the Windows 8 Failure Isn’t a Bad Thing

Last week, Microsoft (NASDAQ:MSFT) did something big technology companies seldom do: admitted it made a mistake.

Windows 8 — the company’s most dramatically different operating system update in years — represented what CEO Steve Ballmer called a “bet-the-company” moment. Microsoft spent somewhere north of $1.5 billion promoting the new tablet-inspired OS … only for the product to fail to catch fire on shelves, create a cacophony of user complaints about an interface that appealed to tablet users but alienated many core customers and be blamed for slumping PC sales.

So Microsoft cried uncle.

A senior Windows executive, quoted in The Wall Street Journal, said: “The learning curve is real and needs to be addressed,” as she confirmed that Microsoft’s next Windows update (code-named Blue) will incorporate modifications to make the OS more appealing to that non-touchscreen crowd.

Primarily, that’s expected to include a return of the “Start” button introduced in Windows 95 and an option to boot directly to the familiar desktop instead of Windows 8’s tiled interface.

There’s been widespread speculation that Microsoft’s admission that it made a mistake with Windows 8 — and an expensive mistake at that — is a sign that the company is struggling. I take a different view. I think the fact that Microsoft tried such a big move is a positive sign, even if they got it wrong.

Microsoft could take the route of playing it safe and cruising for years as a big, profitable company. Heck, it’s already one of the biggest in its industry with decades of market dominance and a quarterly dividend that has doubled over the past five years.

However, technology can change rapidly and even the biggest tech companies can be left behind if they fail to take risks.

But on the flipside, any time you take a risk, there’s a chance you’re going to miss the mark.

The personal computer is not going anywhere any time soon, but the fact remains that PC sales are slumping and the industry is in decline. Tablets are the devices buyers are increasingly turning to. If Microsoft were to ignore that trend and stay focused on the market it dominates, the company could continue selling Windows and that highly profitable Office productivity suite to existing customers for decades. That’s fine if you simply want MSFT to join your portfolio because it’s stable and pays those dividends.

If you are investing in a company expecting its stock value to show real growth, though, then that blue-chip, conservative approach doesn’t usually cut it. Apple (NASDAQ:AAPL) exploded in value because the company took risks, stepped well outside its core PC market and seized the portable music market. It didn’t sit back then, but continued to take risks, becoming a dominant player in the smartphone market before essentially creating — and then dominating — that tablet market that’s been killing the PC.

Microsoft took a risk with Windows 8 — something it hasn’t done for a long time. The Zune (its iPod competitor) tanked; the company rolled the dice with its Xbox game console in 2001 and that line of business has played out very well for it. However, these were side businesses at best.

Gambling with Windows has much bigger stakes. With the entire PC market shifting, Microsoft’s Windows 8 gamble shows it was willing to try not just adapting, but reaching. Between Windows 8 and its foray into the tablet space with the Surface, the company has signaled it’s more ambitious than many people had given it credit for.

The execution may not have been perfect and the reaction may not have been what was hoped for, but let’s face it — even though the move may have cost Microsoft some PR points, delayed some upgrades and led to more calls for CEO Steve Ballmer’s head — the flop wasn’t that bad. An update with a few tweaks should be enough to make things right.

That old maxim “You can’t succeed without failure” holds true in business and perhaps even more so when it comes to technology companies. To me, the Windows 8 do-over is a positive sign because it shows Microsoft is still trying.

Personally, I’d be more concerned if Ballmer and Microsoft stuck to a patter of modest Windows updates, catering to the people who like things the way they are.

In the tech industry, that’s a surefire way to eventually find yourself becoming the next Kodak — an iconic pioneer turned blue chip that stayed the course and played it safe as technology changed everything … all the way to Chapter 11.

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

Article printed from InvestorPlace Media, https://investorplace.com/2013/05/why-the-windows-8-failure-isnt-a-bad-thing/.

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