Microsoft's Q1: Windows 8 expectations mixed

Microsoft's Q1: Windows 8 expectations mixed

Summary: The Windows 8 launch appears to be devoid of optimism---except from Microsoft executives. File this launch and the financial impact of it in the wait and see category.


Microsoft will report its fiscal first quarter earnings on Thursday and all eyes will be on the Windows 8 launch next week. However, expectations for the Windows 8 launch appear to be mixed at best.

The PC industry just isn't sure what to make of Windows 8. Intel CEO Paul Otellini noted there are many form factors and it's unclear which one will win. Otellini said what hardware ultimately wins with Windows 8 may not be known for a year.

Couple Windows 8---an OS that will have a new interface and learning curve---with slowing PC sales and Microsoft's big launch has a series of unknowns. Those uncertainties will be reflected in Microsoft's quarter as well as the commentary that follows the results.

Also: Microsoft's Surface: A few answers yet more questions | Microsoft's Surface: Critical to Windows 8 launch as PC hedge | Removing Start for Windows 8 was the right thing to do | Google and Windows 8, working together | All Windows coverage

Microsoft is expected to report first quarter earnings of 43 cents a share on revenue of $12.68 billion ahead of the Windows 8 launch, according to Wall Street estimates. The fiscal second quarter, ending Dec. 31, is expected to bring earnings of 67 cents a share on revenue of $17.77 billion.

Credit: Ed Bott

Given that jump from the September to December quarter, analysts are modeling some sales pop. But analysts remain wary.

Evercore analyst Kirk Materne said:

We believe the early feedback on Win8 is likely to be a bit mixed and demand muted until new touch-enabled hardware is shipped later this year/early 2013 – tempering any post-launch rally.

Barclays analyst Raimo Lenschow said that weak PC sales are worrisome for the Windows 8 launch:

Although part of the justification for the PC weakness is commonly attributed to restrained buying ahead of Windows 8, a major snapback in shipments from such a large decline is difficult to imagine.

Oppenheimer analyst Shaul Eyal noted:

We expect Win8 to be a solid product. Near term, we believe there is less pent-up demand than when Win7 was released with fewer touch products available at launch date. Additionally, the fact that Win8 overhauls the user-interface could stretch the product cycle acceptance by a few quarters before catching on.

Others are more upbeat. Morgan Stanley analyst Adam Holt is projecting that 3 million Surface units will sell in the December quarter. The fact that Surface has a version of Office on it works to Microsoft's advantage, said Holt.

Morgan Stanley’s May 2012 Blue Paper on tablets suggested that 61% of potential tablet users saw the ability to use Office as among the most important features to consider when purchasing a tablet, and should work to Microsoft’s benefit.

In the final analysis, the Windows 8 launch appears to be devoid of optimism---except from Microsoft executives. File this launch and the financial impact of it in the wait and see category.

Topics: Enterprise Software, Microsoft, Mobility, Tablets, PCs, Windows

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  • I'm excited about the iPad Mini launch next week

    And I think Microsoft is having some kind of press event.
  • I'm excited about the iPad Mini launch next week

    And I think Microsoft is having some kind of press event.
  • Fire the Product Managers!

    "until new touch-enabled hardware is shipped later this year/early 2013" How stupid do you have to be to not see the touch / multitouch revolution coming to "PC's"? Everybody uses touch on their phones, on their tablets and W7 made it desirable, W8 imperative. If every computer screen has touch, the cost becomes negligible -- and all those product managers missed the boat to be the first and clean up for Christmas 2012.
    • Nope

      Touch is an inherent compromise. No one really wants to smear greasy fingers over their viewing surface -- that's the worst kind of interface. In fact, this was tried before on the desktop... early CAD systems used light pens and touch screens, even before the PC caught on. They failed.

      Why? A couple of reasons. For one, reaching up to touch your vertically oriented, large screen display is very fatiguing. It leads to RSI injuries. And it's totally unnecessary. We're far better dealing with horizontally mounted UI surfaces. The mouse, the puck, the track pad, the graphics tablet... even Microsoft's original Surface Tables made sense, being horizontal.

      We rarely choose to write or paint with our fingers. There's a reason for that -- we have far superior tools. The one place touch makes sense is mobile computing, and in particular, content-consumption-driven mobile computing. It's a compromise, but so is mobile computing in general. I'm accepting a device with lower power, limited I/O, etc. in order to be able to take it with me.

      Touch will always fail on the desktop. It always has won on mobile... even before Apple launched the era of capacitive touch with fingers, every mobile device had a stylus of some sort. That's actually superior -- it's more accurate, less obscuring of the visual display, and it doesn't leave grease. But people lose them.

      That hasn't gone away, either... Microsoft is including a pen digitizer on the Surface Pro tablets, which will let you control Windows Desktop stuff too small for your fingers to manage. That's the way most users will interact with the established Windows applications on these devices... obviously not an issue for the All-New Windows RT machines. But one might question the value of a "Windows" tablet that doesn't run a single Windows application.
      • Spot on

        Touch doesn't make sense on the desktop.

        Pushing touch monitors will reduce the price advantage of windows PCs.

        I'm intereted to see the reaction to Win8. Touch on the desktop and the UI changes bewildering to me. We'll have data in a month.
        Richard Flude
      • not hazy, dave

        Well said, Dave. Enterprise users buy computers to get real work done, not fool with photo libraries and browse the app store looking for a new game to play. The productivity of the M$oft OS started downhill with Vista and it just keeps getting worse. To get anything done now takes more clicks, mouse moves, and hunting than it ever did.

        Perhaps M$oft has abandoned the desktop as a dying market. Fortunately for M$oft Vista/Win7 is so bad that many users will try Win8 in the faint hope that it will be better (but alas it's very likely that the joke's on them, and M$oft will be laughing all the way to the bank).

        M$oft is betting that their size and momentum will make it possible to compete with Apple in the tablet/phone market. But with their extensive track record of failed hardware ventures and a new OS built by the same idiots that gave us Vista/Win7, it's a long shot.
        Anono Mouser
      • Maybe someday...

        But not yet. Chicken or the egg with software and good hardware.

        Our company had a global conference where we are deciding to NOT upgrade to Windows 8. We announced to our suppliers, including Dell, that we will not buy any hardware that only offers Windows 8 in the future. That's oh, around 18,000 computers bi-annually.

        THAT's why Microsoft isn't so happy, as we're not alone. It will be at least 5 years before it's proven before it's adopted by Enterprise. Do you really expect companies to buy all new equipment to support this software immediately, especially in Gen 1? No.
  • Desktop touch screen

    Maybe I'm old fashioned, but I still don't understand a desktop with a touch screen. Imagine holding your arms out in the air front of you all day. While touch is extremely intuitive on a device you are holding in your hands, it does not make sense on a large screen in front of you. But I am really looking forward to trying out the Surface RT!
    • Actually, it works.

      It works better than you think it would. I have an all-in-one machine with a touchscreen that I've been testing Win8 on in my enterprise, and I was surprised by how quickly I adapted to using a combination of the keyboard, mouse, and touchscreen.

      When it makes sense to use the mouse and keyboard, I use them. When it makes sense to touch the screen, I touch it.
      • Re: It works better than you think it would.

        Wonder why it hasn't been tried before, then.

        Oh wait, it has--several times, going back to the 1980s. All that happened was they kept rediscovering "gorilla arm" syndrome.
  • Microsoft's Q1: Windows 8 expectations mixed

    Where the hell are you coming up with these conclusions? Devoid optimism except Microsoft execs, expectations are mixed at best? Have you not been reading your own site where every 3rd article was praising the Microsoft Surface? Everyone is talking about Microsoft Windows 8, plenty of articles here on ZDNet about it. The Microsoft Surface, Windows Phone 8, Windows 8, there is so much buzz going on about these products right now that everyone is curious and waiting for that magical October 26th date. Microsoft is going to have another solid quarter this quarter and the next but you will refuse to believe that because as you openly admitted you want to live in the RDF.
    Loverock Davidson-
    • The Bright New Future

      Brought to you by Microsoft.

      Let's all bow to the one and true Windows religion.

      Pills time, I guess?
  • Expectations vs reality

    Until I switch to tablet computing or multi touch monitors there is no need to change to Windows 8 which is a tablet cobbled version of Windows 7. Any survey you look at shows most users NOT planning on making this change (can't call it an upgrade). Sure, the execs are betting on the future here and the supposed death of PCs and they are probably right but it is too early in the game for me and a whole lot of others. Not likely to be a loser product but certainly not a robust sales leader. Yes, I tried it as I have every beta of Windows before and it doesn't work for me at this point.
  • Haters

    All of the nay-sayers and haters are just jealous of the newest and most secure Micr0$uck$ LoseDoze Operating System (O/S). Everyone wants the INNOVATION and INTELLECTUAL property that gives the ability to install the internet and browse the web and point and click and cut and paste and multitask and do all of the things that are so insanely DIFFICULT if not outright IMPOSSIBLE to do with another other O/S.
  • windows 3.11

    the touch screen pen didn't work that well back with windows 3.11 for work groups on what we had,desktops. why does microsoft think it will again on a desktop.
  • Desktops

    I can't see touch screen desktops working very well, in my case, not at all. I have 2 22" NEC monitors used for Photoshop. I do use a Wacom tablet with them, but a touchscreen?. My arms would fall off. I can see the 128gb Surface Win 8 Pro running a modified Photoshop CS6 though. Might run CS6 now hardware wise, except dreadfully slow. I don't know about the compatibility of Win 8 on a tablet and Photoshop.