Is Microsoft Misleading Investors?

According to Microsoft (NASDAQ: MSFT  ) , Windows 8 has now sold 60 million licenses to date, a figure that includes upgrades and sales to original equipment manufacturers. Back in November, Microsoft had reported that 40 million copies of Windows 8 were sold. In other words, about 20 million copies were moved in a little over a month. Doing the quick math leads investors to believe that the holiday quarter was a complete knockout for Microsoft and overall PC sales. It implies that pent-up demand for PCs is rather robust, and Gartner's estimated 8.3% decline in PC shipments in the third quarter was likely the near-term bottom. However, getting into the details gives investors a better sense of what's really going on.

Promotion, promotion, promotion
Windows 8 has been promoted since June 2, 2012 -- about 4 months before it was released to the general public. If you purchased any PC running Windows 7 since then and still through Jan. 31, you are eligible to purchase Windows 8 Pro for $14.99. For those of us who did not purchase a Windows 7 machine during this time, you can download a copy for $39.99.

History did not repeat itself
Looking back at the Windows 7 launch shows just how much business has changed for Microsoft. Back then, it was specific PC manufacturers that opted to provide free upgrades from Windows Vista PCs, although Microsoft likely cut a deal with OEMs behind the scenes. In an effort to improve initial reception, Microsoft reduced upgrade prices to $49 for Windows 7 Home Premium and $99 for Professional for a limited time from the standard $119 and $199 (respective) pricing.

60 million copies? No kidding!
I'm not surprised that Windows 8 unit sales are on a similar trajectory to Windows 7. Microsoft's promotional period, still going on today, allows it to capture a large no-brainer upgrade base. This helps Microsoft to report strong up-front Windows 8 unit sales. What the company fails to mention is how this figure came at the expense of its average selling price, which has dropped substantially since Windows 7 Pro's debut.

I'm left wondering how many of these licenses were part of the Windows 7 no-brainer group who paid only $14.99. That said, investors should take Windows 8 unit sales and implied PC sales as a grain of salt until earnings are released on Jan. 24.

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  • Report this Comment On January 10, 2013, at 7:50 PM, marv08 wrote:

    Everything you say makes perfect sense, no objections. I just find considering this as "misleading investors" a bit stark.

    MS has not even hinted at any revenue or profit figures in their statements. If people are too dumb to interpret these statements with a grain of salt, they should not buy stocks in the first place. It's a jungle out there...

    (And I absolutely say that as somebody who has no sympathies for MS whatsoever.)

  • Report this Comment On January 10, 2013, at 11:16 PM, techy46 wrote:

    Wow, so how many people buying the latest iPhone traded in their old one? When will all the antt-Microsoft na Nokia crap stop?

    Microsoft sold 60 million licenses in 10 weeks. Nokia sold 4.4 million Lumias in 12 weeks, really 10 since old Lumias stop selling before WP8 launch. So that's 64.4 million licenses or 6.44m per week. Microsoft will sell 365x6.44 or 335 million copies of W8 and WP8 plus 50m copies of W7 for a total of 385m licenses in the next year. Oh, how many copies of WP8 will HTC and Samsung sell? Ok, let round up to 400 million PC, yes smart phones are PCs, running W8 and WP8 in the next year if pepole stay cool to the fact that both of these OS's make Android and iOS look lame.

  • Report this Comment On January 11, 2013, at 7:46 AM, 4melody wrote:

    There really is a lot of anti-Microsoft bashing going on for baseless reasons.Seems like an excellent time to pick up more shares to me! Logical thinking seems to escape the cattle behaviour of having the latest iphone or iwhatever! ~ mkp

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