With Windows 8, Microsoft's playing a scene from Groundhog Day
As I read the coverage of Windows 8's initial reception, I feel like Bill Murray waking up in Punxsutawney to relive the same day over and over. We've played this scene out before. So how does it end this time?
I swear I can write this post over and over and over again and never run out of new material.
Every bit of reporting I've read lately on Windows 8 could just as easily have been written in 2001, at the dawn of the XP era.
Like a scene out of Groundhog Day, we now get to read, again, that Microsoft's death spiral has begun because PC sales have slowed down. Here's our very own Adrian Kingsley-Hughes with a representative prediction of doom just this week:
How long can the Redmond, Wash.-based software giant remain a giant in the face of dwindling PC sales and increasing competition from the likes of Android and iOS? My guess is not for long, unless the company takes some swift and serious action.
It's true: People aren't rushing out to buy Windows 8 PCs. The launch of Windows 8 didn't cause a spike in the consumer market. In fact, overall sales of PCs might even be down.
The worldwide PC market contracted sharply in the third quarter of 2012 (3Q12), with shipments declining 8.6% from the third quarter of 2011.
The U.S. market came in slightly weaker than an already negative forecast, contracting 12.4% compared to a forecast of –9.5%. This reflected weaker consumer demand, including a weak back-to-school season, and an industry-wide inventory clean up. The consumer segment was particularly affected as buyers focused on competing products.
You know, just like in 2001.
Right after XP launched, the BBC published this post: PC makers hope for XP boost. It was filled with doom and gloom and this startling statistic about the need to revitalize the "flagging market":
For the first time since 1986, demand for PCs is flagging. During July to September, sales plummeted 11.3%, according to computer research firm Gartner Dataquest.
So will consumers go out and buy PCs just to get a new operating system that will make their computer screens look like a bright and colourful Apple Mac without losing the familiar wording of Windows' drop-down menus?
A closer look at Microsoft's own figures shows that the XP boost may be smaller than the hype suggests.
In relative terms, Microsoft expects XP to be less successful than Windows 95.
At research firm Gartner, analysts warn that while "Windows 3.x, Windows 95 and Windows 2000 did wonders for sales", Windows XP "will not be a primary driver of PC sales in 2001 and 2002".
“After just four weeks on the market, it’s still early to place blame on Windows 8 for the ongoing weakness in the PC market,” said Stephen Baker, vice president of industry analysis at NPD. “We still have the whole holiday selling season ahead of us, but clearly Windows 8 did not prove to be the impetus for a sales turnaround some had hoped for.”
But here's what's interesting: Every repetition of that cold day in Pennsylvania is not the same. Some ended well, some ended comically, some ended very badly.
So how does this scene play out for Microsoft in 2012 and 2013?
Let's examine the landscape:
PC purchases go in cycles. That's especially true of businesses, which don't buy as many PCs when worldwide employment is down as it is now. But Microsoft's business side is strong enough to fund a big transition on the consumer side.
The market for conventional PCs is declining, for a variety of reasons. Consumers and businesses alike are stretching out the useful life of PCs, which means that the installed base remains constant as fewer machines are replaced and retired. A down cycle in a declining market is not pretty.
Tablets (specifically the iPad) are soaking up lots of money from consumers and increasingly from businesses. Those are budgets that might have gone to a PC previously.
In a world where individuals have multiple computing devices, the PC probably has the longest replacement cycle. Mobile phone owners turn over their devices every two years or so (some more often). The iPad hasn't been around long enough to establish any meaningful trends, but early iPad adopters seem willing to replace their devices every two years, handing down or selling the old one.
Microsoft and its OEM partners are trying to shift the definition of a PC so that it encompasses some of the capabilities for which people would otherwise choose a tablet. But getting those smaller, more mobile products into the market just takes time. The first wave of touch-enabled PCs are offering a glimpse of some of these new formats: hybrids and slates and notebooks that flip and contort.
And PC manufacturers are taking their own sweet time rolling out new products. A Bloomberg report today noted:
At a September event, Intel said nine PC makers, including Dell Inc. and Hewlett-Packard Co., would have devices with its newest low-power chip [Clover Trail] on sale when Windows was released in October. More than a month later, only four manufacturers do. Of those, only two have products in the U.S., Intel said.
It will take a year or two for those new hardware designs to sell in sufficient quantity so that they seem normal instead of strange and different. Even a weak PC market will crank out and sell hundreds of millions of devices in two years.
XP succeeded because Microsoft was persistent and the hardware improved dramatically over time and no strong competitors emerged until years later.
This time around, conditions are unlikely to line up as neatly and favorably as they did in the years after XP's launch. In particular, Microsoft has a very strong, focused competitor in Apple and an erratic but determined competitor in Google. It's unlikely that both will stumble at the same time.
Many developers abandoned Microsoft to work on pure web-based projects and on apps for iOS and Android. Luring them back to Windows, even a new and improved Windows, will be a challenge. And it will take time.