Will Windows 8 Bomb?

When Microsoft (Nasdaq: MSFT  ) first unveiled Windows 8 earlier in the year, I was thoroughly impressed with its tablet potential. Research firm IDC doesn't feel the same way, though.

I had written, "I think Windows 8 will be a winner in the tablet market, though I do have some reservations on how the OS will fare in the traditional desktop and laptop segments, since the UI is so heavily geared toward touch." For the most part, I still stand by this statement.

Mind if I cut in?
I don't think Windows 8 tablets will beat the iPad 3, but that doesn't mean it can't be successful in its own right. Apple (Nasdaq: AAPL  ) should continue to reign supreme in the tablet market for the foreseeable future, but the market is growing so quickly that there should be room for a few other players to succeed.

Echoing my skepticism of the operating system's desktop and laptop prospects, IDC says, "Windows 8 will be largely irrelevant to the users of traditional PCs, and we expect effectively no upgrade activity from Windows 7 to Windows 8 in that form factor." In fairness, IDC is extremely bullish on Windows Server 8's possibilities.

WinARM versus Wintel
IDC believes Microsoft will have a tough time delivering a "successful" tablet experience as it ambitiously embraces both x86 processors, like those from Intel (Nasdaq: INTC  ) , and those based on ARM Holdings' (Nasdaq: ARMH  ) designs. The researcher concedes that the x86 tablet strategy may work as a transition for current PC users, but Windows on ARM has some high hurdles to clear.

One of the biggest challenges WinARM will face is that applications will need to be rewritten to be compatible with ARM architecture, and existing ARM mobile devices will already be even more mature by the time Windows 8 hits. Apple has set the ARM-based standards in mobile, so Windows 8 will be facing an uphill battle.

It's been done
It's worth mentioning that Apple has successfully made such profound processor architecture transitions in the past. Apple transitioned from Motorola 68k processors to PowerPC chips in the early '90s, only to subsequently proceed to Intel processors in 2006 -- the difference being that Apple provided software emulators every step of the way, to help hide the seams of the switch; Microsoft is not providing any emulator to allow x86 applications to run on ARM.

A new level
Apple's biggest criticism of Google (Nasdaq: GOOG  ) Android has always been its fragmentation. Android fragmentation typically refers to the onslaught of differing hardware specs and OS versions found out there. Having two entirely separate Windows 8 platforms, x86 and ARM, would take fragmentation to a whole new level.

I think Microsoft needs to change its mind and include emulation so that both versions of Windows 8 can play nicely together. The confusing part is that it doesn't seem like Microsoft is taking a stance over which it prefers. That ambivalence may end up hurting the OS, since developers may have to pick which architecture to focus on, adding fodder to the fragmentation criticism.

What's the point?
The argument that current PC users will have little to no reason to upgrade to Windows 8 is particularly valid, especially considering enterprise customers who may have just finished migrating to Windows 7. It makes little sense after just making a switch to embark upon an OS whose touch-centric "Metro" interface has dubious value when used on a traditional mouse-and-keyboard PC.

Back to tablets
IDC thinks Windows 8 tablets will be "disappointing." Forrester Research (Nasdaq: FORR  ) and Gartner similarly agree. While I happen to think Windows 8 tablets have a decent chance, they will definitely face some headwinds. The biggest issue will be their late arrival.

In my Foolish opinion, Windows 8 tablets will have much better odds if Microsoft fully embraces ARM-based tablets while leaving x86 offerings to desktops and laptops. It will need to wow the market to compensate for its unfashionably late debut, and the only way to do that is with decisive focus.

This story is just beginning, and only time will tell once Windows 8 is released next year. Stay up to speed by adding Microsoft to your Watchlist. Speaking of the mobile revolution, don't miss this free report on 3 component suppliers who are cashing in on the move to mobile.

Fool contributor Evan Niu owns shares of ARM Holdings and Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Intel, Microsoft, Apple, and Google and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Apple, Intel, Microsoft, and Google and creating bull call spread positions in Apple, Microsoft, and Intel. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (11) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 06, 2011, at 9:32 PM, marv08 wrote:

    Don't know if "bomb" is the right word, as pre-installed Windows 8 on new computers will certainly be enough to create some decent sales numbers, just not the desired profits.

    Windows 8 on ARM tablets (the only relevant ones) will have a hard time for another reason (on top of no apps, no developers, no ecosystem and being years too late): MS (if they stick with their announcements) will not offer a "tablet edition" of Windows 8 at a lower price. How many OEMs (that can't compete with Apple on the high end and Amazon on the low end now using the free Android) will improve their calculations using $35-$50 OEM versions of Windows 8?

  • Report this Comment On December 06, 2011, at 9:42 PM, TMFNewCow wrote:

    marv08,

    Great point on the pricing.

    -- Evan

  • Report this Comment On December 06, 2011, at 10:14 PM, techy46 wrote:

    I think IDC is way out on this one, Windows 8 has all sorts of improvements beyond supporting two user interfaces; Aero and Metro. There's a billion reason why people don't want another software vendor to deal with and they're all Windows users. Windows 8 will be the only OS that spans the consumer mobile ecosystem from mobiile toys to the Xbox home entertainment server and the enterprsie ecosystem from desktop, notebokk to data center servers. Here's a link to 10 resos to ponder Microsoft's success:

    http://www.eweek.com/c/a/Mobile-and-Wireless/Windows-8-Table...

  • Report this Comment On December 06, 2011, at 10:55 PM, marv08 wrote:

    @techy46: While this argument does sound reasonable, it has been proven wrong again and again. The 80s are over, people do not look for everything from one source and IT departments are embracing BYO concepts, even in conservative environments.

    If this integration would mean anything, Windows Mobile would have had more than 7-8% market share, Windows Phone 7 would have more than 1.5% market share etc. Where people have a choice, they do not choose Windows. Windows 8 will not change that.

  • Report this Comment On December 06, 2011, at 11:53 PM, SSchlesinger wrote:

    I think Microsoft saw the rapid expansion of ARM based phones and felt they were on the wrong side of the fence with Intel. Then HP bombed with their tablet as did the Playbook. There were no real Android devices to speak of to make a difference in the market. They tried marketing them through wireless carriers and everywhere else including Costco.

    It seems that Microsoft is doing a bit of damage control with ARM and is kinda treating them like a red headed step-child at a family picnic. I agree with the author's point of being all or nothing with ARM.

    i think ARM is getting a raw deal. Microsoft will sell the apps in a closed Metro market much like the iTunes store. They want the same 30% model. as Apple. Apple did have one thing in it's favor when they introduced the iPad. It had 100k apps ready for purchase.

    If they won't do the Windows desktop in ARM the very least they could do is open the metro apps for sale outside of their store. If you are a small time software developer the exposure of the store is life or death. if you are the Wallstreet Journal you can care less.

    Hopefully HTML5 will be a work around those who don't need a store to market their software. And, if I can put Google Chrome on the Windows ARM tablet I can learn to live without the Metro store.

  • Report this Comment On December 06, 2011, at 11:54 PM, techy46 wrote:

    By people you're talking consumers, By a billion Windows users I'm talking enterprise clients and working users. Let's see how Nokia's Lumia 800/900 does when released in to US market next month. It's sold out in UK and several other countries. I just retired in 2010 as a Director of IT and the rules for client deployment we used we not from the 80s.

  • Report this Comment On December 07, 2011, at 11:40 AM, mikecart1 wrote:

    Is my name mikecart1?

  • Report this Comment On December 07, 2011, at 11:41 AM, Brettze wrote:

    Microsoft needs to focus on users who want to be able to use desktops while sitting in reclining chairs or known as LazyBoy chairs.. I am one of them who want to be able to sit back and relax while using my desktop.. I never care for the stiff office desk and chair!!! As you should know that Microsoft is working on bringing TV to computer so it is hitting two birds with one stone.. maybe Microsoft can acquire Lazy Boy and intergrate comfy lazy boy chairs into computer equipment.. You can throw in Kinetc as well.

  • Report this Comment On December 07, 2011, at 10:08 PM, baldheadeddork wrote:

    Y'all are missing the point. You're not even in the same area code of where Microsoft is going with this strategy.

    Having ARM and x86 versions of Win8 for tablets isn't about putting both versions on the shelf at Best Buy or selling them against each other in the Dell hour on QVC. Unless Microsoft has lost all of its mind, that isn't going to happen.

    Think about another "fragmentation" of Windows that has worked out pretty well. Since XP, there have been Home and Professional versions of Windows. They look and work the same, but the Pro version has some networking features that make organizing even small business networks much easier. You pay a little more for the Pro version, and because it doesn't have any real benefits in the retail market you hardly ever see it on computers in the retail channel. But having it allows Microsoft to make a little more and offer business customers features that really does make their lives easier.

    That's exactly how the Win 8 tablet market is going to shake out. If you buy a Windows 7 Home Premium computer, or an iPad, you'll buy a Win 8 ARM tablet and download apps from the marketplace just like you do for iPad and Android devices. Unless you regularly pick up computer magazines, you'll probably never know there is a different version.

    But if you're a business, you'll go to the Dell or Lenovo website and order x86 tablets. You'll pay a more, but Microsoft is throwing in a couple of carrots that could make this tablet a smash hit. First, is full compatibility with Windows 7 software. A medical practice can run their existing EMR and practice management software straight from the tablet, instead of waiting for the vendor to create an iOS app and then paying a premium over the seat license for it.

    That removes the biggest roadblock to using tablets in the workplace. I've got customers who would love to deploy iPads but can't because either the iOS software doesn't exist or getting the iOS version requires a hugely expensive upgrade of the entire suite. With the x86 Win 8 tablet, if your software runs on Windows 7 it will run on the tablet. All you need is the same installer package you use on your desktops.

    In this hugely important area, Microsoft is ending the fragmentation that Apple has created. For business users, software will be platform agnostic between desktops and tablets for the first time.

    The other advantage is that, like Windows Professional, x86 tablets can be joined to a domain. Administrators will be able to set user policies once and have them deploy to all tablets in the domain, and software on the tablets will be able to access domain databases and services like file sharing and printing.

    If Microsoft and tablet vendors charge more, it's probably still going to be less than a decent Windows Pro laptop and for a lot of applications it's going to be more convenient for the end users. I've been in this field since the mid 90's, and the potential of x86 Win 8 tablets is the biggest of any product I've seen in over a decade. This compares with the launch of Blackberry. It really could be that kind of transformative event for business IT. How many units are we talking about? If software does run as well on the tablets as on desktops, the take rate among my clients would conservatively be in the 30-40% range and most of them would be an added device, not a replacement for a laptop or desktop. Global sales of x86 tablet to business users alone could easily eclipse the iPad.

    So what about the ARM version? I think it's going to live or die on how WP7 does this year. If Nokia's new Mango handsets are a hit in the markets where Nokia is still strong, there's a decent chance that the Win8 ARM tablet will be well received. There's a very good chance that the Win 8 ARM tablets will sell well outside of the US but struggle here. (And if it does, bet on US-centric analysts screaming that it's a flop.)

    Last, if there's a low upgrade rate from Win 7 to Win 8 is irrelevant, and any analyst who said it was important shouldn't be trusted to find the any key. Depending on who's counting, between a third and half of all desktop/laptop computers in use worldwide are still running Windows XP and support for that OS ends in spring 2014. Another 10-15% are on Vista. That's about 750 million computers that will be replaced in the next five years, on top of the growth of the market. If Microsoft doesn't sell a single Win 8 upgrade license ever it will still be the most successful OS in history as it replaces XP machines.

  • Report this Comment On January 04, 2012, at 9:25 PM, toneill69 wrote:

    While i have Microsoft stock, I could not be more upset with a company. Their constant new versions and their sabotage of their own products once a new version is released. The new version $235 to $500 more expensive that apple products that include the software. Micrsoft and Gates are the world's greatest pirates, they never support their own products, not even a user manual. I personally have spend thousands on their crapa software and most of the 40 to 50 versions i bought are designed to self destruct. . So i cant wait for Apple to take over that universe - They can develop their own office suite and document publisher for a few bucks and then

    finally we will be free - I am sure i lost a year of my life to gates and company , their tricks. Thye have held back IT fo years- now apple has let the genie out of the bottle for all of us to benefit- Jobs did not want to be the wealthiest man or greatest philanthropist in teh world - he just wanted us to have a great and useful product.

  • Report this Comment On March 15, 2012, at 5:57 AM, CodeGimp wrote:

    Presumably Microsoft will port the .Net framework to the ARM platform, too. This would facilitate the fast porting of recent apps from x86 and would be quite compelling in the enterprise sector looking to reduce IT support and infrastructure costs.

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