Windows 8: Microsoft's Qwikster Moment

Microsoft (NASDAQ: MSFT  ) pulled a Netflix (NASDAQ: NFLX  ) move last year -- and not in a good way.

The Windows 8 update was a radical departure from the usual Windows fare. If you sharpened your computing skills using the nearly 20-year-old Windows 95 interface, then you could still get around Windows Vista or 7 with little trouble. But Windows 8 reset every expectation you might have brought along. The software was clearly optimized for touchscreen tablets first, then grafted onto traditional PC systems with a half-barked order to like it or else. Users largely hated the abrupt shift and complained in droves.

So far, so Qwikster-like. Netflix built a successful DVD-mailing video-rental service with a bit of digital streaming on the side. Customers started getting used to the complete DVD library and convenient streaming service, side by side. Life was good, and share prices climbed as high as $300.

Then, with little warning, the company split the streaming service apart from DVD mailers and asked customers to swallow it. DVDs were scheduled to spin off into a totally separate entity. The proposed name Qwikster quickly became a curse word, and users only saw decreased convenience for a higher total price -- kind of like the forced march into Microsoft's tablet-oriented Metro experience.

And that's where the similarities end.

Netflix backed out of the Qwikster dead end swiftly and gracefully. CEO Reed Hastings posted a public apology and scrapped the wholesale Qwikster separation. He still introduced separate DVD and streaming plans but kept them integrated under one service umbrella. It hasn't been a smooth ride, but share prices have tripled from the Qwikster lows. Splitting off the DVD service might be a realistic idea nowadays. Qwikster was a timing error more than anything else.

Microsoft could have followed a similar path: drop the most controversial features of Windows 8 or at least make them optional, rather than mandatory; bring back the good old "Start" menu for users who feel lost without it; leave the tablet-like app store in the ditch, and bring it back when customers are ready for it; and train people on tablets first and then introduce the newly familiar features of the core Windows experience.

But no, that's not what Microsoft is doing. Redmond is about to introduce a Windows 8.1 update, and it's a free upgrade for existing Windows 8 users. It's a golden opportunity to back off the largest issues with an unpopular platform. Instead, Microsoft decided to tweak a feature here and there while keeping the core experience far too intact. We're talking about cosmetic changes that do nothing to smooth over the jarring transition from older Windows systems.

For example, the missing "Start" button is back, but without the cascading program menu you're used to. Instead, the familiar button becomes just another way (I think there are about four different methods now) to bring up the new start screen -- a brand-new Windows 8 feature with no equivalent in older systems.

Windows users might have appreciated a kinder, gentler approach to the new experience. Windows 8 may in fact be exactly what Microsoft needs in the long run as tablets and smartphones continue to replace full-fledged PC systems for most uses. But we're missing an intermediate step: a hybrid model that lets you play around with the new stuff while falling back to the old way for serious work -- like the current Netflix model, where DVD remains an option if you're nervous about this newfangled streaming-video idea.

That's why Microsoft shares aren't bouncing back, whereas Netflix shares rose like a phoenix from the ashes of a horrendous idea. Instead, Microsoft stock has largely paced right alongside its Dow Jones (DJINDICES: ^DJI  ) peers since the Windows 8 cat was let out of the bag. And I think investors are being too generous, because Microsoft isn't even pretending to fix the root causes of this slowdown.

MSFT Chart

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Microsoft's trailing earnings are down 29% over the last year, and share prices are up 17% for no good reason. I don't think that's fair or sustainable.

It's been a frustrating path for Microsoft investors, who have watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, the company is looking to make a splash in this booming market. In a new premium report on Microsoft, a Motley Fool analyst explains that while the opportunity is huge, so are the challenges. The report includes regular updates as key events occur, so be sure to claim a copy of this report now by clicking here.

Read/Post Comments (5) | Recommend This Article (3)

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 June 14, 2013, at 8:24 PM, dnationsr wrote:

    I don't know what people are doing but I haven't found anything that i did with windows 7 that I can't do with windows 8

  • Report this Comment On June 14, 2013, at 11:51 PM, AsokAsus wrote:

    "I don't know what people are doing but I haven't found anything that i did with windows 7 that I can't do with windows 8"

    You must not be doing very much then. Let me list a few things Windows 8 is missing compared to Windows 7:

    1. Removal of the Start Menu.

    2. Forced entry into the execrable Metro UI each and every logon.

    3. Removal of native ability to play DVDs.

    4. Removal of ALL Aero and shadow effects so only a flat display is possible.

    5. Removal of previous Versions feature.

    6. Removal of Backup and Restore feature.

    7. Removal of Windows Media Center.

    8. Removal of Windows update notifications on the desktop.

    9. Inability to enter Safe Mode directly with F8.

    10. Failure to recognize mouses and keyboards as anything other than generic devices unless you download and install Microsoft Mouse and Keyboard Center.

  • Report this Comment On June 15, 2013, at 3:52 PM, crca99 wrote:

    I agree (!!!) MSFT upgrades are painful experiences. They tend to rewrite unnecessarily rather than keep the popular features and add new options. They don't even know which are their popular features. I keep hoping they'll change.

    Long msft for now and use it daily for hours at work, but not email or pics.

  • Report this Comment On June 16, 2013, at 5:53 PM, lowmaple wrote:

    Most older people like me who have used Microsoft did because it was easy. If you have to read a manual and climb on the roof everytime you wanted to change the T V channel then not many TVs would be sold. The IQ at MSFT is way to high.

  • Report this Comment On June 18, 2013, at 1:22 AM, NoWindows8LockIn wrote:

    Greed blinds.

    Microsoft: Give it up already. We see through your "monetization" gimmicks. They're not working. Your own customers hate Windows 8.

    Looking forward to see how badly you screw up with The Apology.

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