Microsoft Took a Big Risk With Windows 8 and It's Starting to Backfire

Hewlett-Packard (NYSE: HPQ  ) now sees Microsoft (NASDAQ: MSFT  ) as a competitor. For years, Hewlett-Packard and Microsoft had a strong partnership -- but evidently, those days are over. The widespread backlash to Windows 8, combined with Microsoft's decision to release its own, competing hardware, has alienated Hewlett-Packard.

And while Microsoft looks to be on the verge of losing one of its longtime partners, Google (NASDAQ: GOOGL  ) is gaining one -- Hewlett-Packard has eagerly embraced both of Google's operating systems.

Microsoft's biggest gamble
Microsoft took a lot of risks with Windows 8. As the most radical redesign of the its operating system since 1995, there were a lot of things that could've gone wrong -- and many things did.

PC sales have been poor all year -- most recently, research firm Gartner said that PC shipments fell 8.6% in the third quarter, the sixth consecutive quarterly decline. In part, this may be structural -- consumers may simply prefer mobile devices running Apple's iOS and Google's Android -- but the widespread hatred of Windows 8 certainly doesn't help. This year, Microsoft's consumer satisfaction rating fell to its lowest level since 2007, while Samsung blamed Microsoft for falling PC sales.

But more important than the Windows redesign was Microsoft's decision to start making its own devices. Microsoft's Surface RT and Surface Pro are the company's flagship Windows 8 devices, and compete head-to-head with Windows 8 tablets offered by Microsoft's own hardware partners, including HP.

More Microsoft hardware is likely on the way
Microsoft isn't likely to stop at the Surface -- its recent reorganization focuses the company around "devices and services," and its purchase of Nokia's handset business shows that it's committed to making more devices in-house.

If HP stands by Windows, it could find itself competing against a flurry of Microsoft's own devices -- devices paid for, in part, by the licensing fees HP pays Microsoft to use its Windows operating system.

Microsoft's loss is Google's gain
To be clear, Hewlett-Packard still makes devices running Windows -- in fact, the vast majority of its PCs are powered by Microsoft's operating system. Moreover, given that Windows continues to dominate the enterprise market, this is unlikely to change, at least in the near future.

But while Hewlett-Packard continues to make Windows devices, it's making more and more devices powered by Google's operating systems -- both Android and Chrome OS. Most recently, it rolled out the Hewlett-Packard Chromebook 11, and last month, it announced a forthcoming successor to its 14-inch Chromebook model. HP has also introduced numerous tablets running Google's mobile operating, including the Slate 7, Slate 7 HD, Slate 7 Extreme, Slate 10 HD, and Slate 8 Pro.

And why not? Although HP has to compete against other Android manufacturers, most notably Samsung, it doesn't have to compete with the company that actually makes the operating system -- besides its Nexus devices (which are actually made by other companies) and its overpowered Chromebook Pixel, Google is not a major player in the hardware space.

Has Microsoft destroyed its ecosystem?
So far, HP is the only PC OEM to officially come out and label Microsoft a "competitor," but while HP may be the only company actually saying it, no doubt others are thinking it: Last year, shortly after Microsoft announced the Surface RT, Acer's CEO urged Microsoft to "think twice" about its decision.

Ultimately, Microsoft's biggest Windows 8 blunder may not have been the Metro interface, Windows RT, or the Windows app store; rather, its decision to create its own computers -- a strategy it has committed itself to -- may have irrevocably damaged its relationship with its OEM partners, including HP.

In the past, companies like HP had no choice -- there really wasn't anything out there, save Windows. But now, with Android and Chrome OS, Google has given Microsoft's partners a viable alternative -- alternatives these companies, notably HP, are embracing.

Research firm Gartner predicts that, by 2017, Google's Android will have effectively replaced Windows. With Microsoft's former partners switching sides, that prediction seems destined to come true.

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Read/Post Comments (23) | 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 October 13, 2013, at 3:52 PM, CharlieTX wrote:

    Just hoping my Windows computers hold out long enough for Android to get robust enough to use on my desktop. I figure another year to 18 months, and then it'll be time to say "Good Bye Microsoft".

  • Report this Comment On October 13, 2013, at 4:18 PM, kidokwan6 wrote:

    You guys are dumb, windows is the best made OS around.

    That is why it’s been around forever, yes there are a few up and downs but that comes with all OS, MAC has them and so will/does Google/Android.

    Trial and error that is what it takes, don’t even try the whole virus bull here, because any dominant OS will get hacked by any number of hackers if they are/will try, IOS is currently getting hacked all the time now that it’s one of the top operating systems and so does droid. Windows 8 or 8.1 just needs a little work to fit what all you backwards folks want. It’s a great OS you just need to learn to drive it.

    Look when you buy a new car or home or phone, you are not looking for it to look just like it did 10 years ago, you want a new look, hence windows 8/8.1

  • Report this Comment On October 13, 2013, at 4:33 PM, MaikeruSoya wrote:

    don't like windows 8??? THEN DON'T USE IT!

    if you buy a comp with Win 8 do what i did. after i built my comp I didn't upgrade to 8 I HAPPILY stayed with 7 and don't plan on upgrading any time soon.

  • Report this Comment On October 13, 2013, at 4:35 PM, Craige4107 wrote:

    Everyone keeps talking about Microsoft, Google and Android OSs. I have one question: What is the predominant OS used on 70%+ business servers today? What is the OS poised to take over from Microsoft on PCs. That's right, Linux!!!! Android, is by definition, a Linux based OS fyi. Linux Ubuntu and Linux Mint are both very good OSs for PCs, while most servers run either Linux Red Hat or Linux Ubuntu. Oh, and did I mention, Linux is FREE!!!!

  • Report this Comment On October 13, 2013, at 4:38 PM, robflinch wrote:

    What a dumb article against Microsoft, however, certainly a good use of blogging to do the job.

    There is likely that by introducing its own hardware, Microsoft would alienate HP and the likes, but it has no choice if it has to build its own ecosystem.

    I've used computer based iOS, Win 95, 98, XP, Vista, 7 and now 8. And, as much I hate Vista and 7, I don't hesitate to say that with Windows 8, Microsoft, after a long time, has learned to innovate. On the other hand, Chrome OS, simply put, is boring.

    I've used Androids for long time. It's highly prone to crash, simply because it is prone to be bugged by all kind of open-source apps. On the other hand, Windows 8 mobile is a simple, secure, and cool. And when I say cool, I mean literally cool, because Android-based hardware emit too much heat.

    So peeps, write reality, not what you are paid to write.

  • Report this Comment On October 13, 2013, at 5:12 PM, Netteligent09 wrote:

    Microsoft, Intel, and Wintel are dominant with few key players and strategy served them well during the past 20 years.

    Time has changed. Customers starting to migrate away from Wintel whenever they do have a chance. Now they do have more options available beyond boring Wintel. Nothing has changed much and expensive due to near monopoly.

    Application Developers are signing up with either Android, Linux, or Apple which inspire creativity, breakthrough, and innovation.

    You will see a huge ARM based platforms beyond tablets and smartphones.

    Unless miracle occurs, both Wintel is losing market share.

    Bigger corporations are moving away from Wintel now and new platforms are awesome at cost effective price.

    Its most recent numbers suggest this has been a spectacular failures for Wintel ahead. Innovate or die.

    Great business is where everybody wins, include customers.

  • Report this Comment On October 13, 2013, at 5:20 PM, Netteligent09 wrote:

    One more thing...Ironically, Google and Apple lead all the innovations and breakthroughs lately, not Microsoft and Intel.

    Huge application developers are following to utilize their talents and create opportunity of a lifetime for themselves: do what they love the most.

    It seems everybody benefits, except Microsoft and Intel.

    Nobody wants to go with Intel and Microsoft anymore, just want to maintain relationship. You have not seen the worst yet.

    Remember, Microsoft and Intel cannot buy love.

  • Report this Comment On October 13, 2013, at 6:07 PM, rotorhead1871 wrote:

    consumer market and business market are 2 different animals...ms owns the business world.//networked computers /vpn operations....and are moving into the consumer market...apple and google have virtually no presence in the business sector...their products should be sold at toys r us...

  • Report this Comment On October 13, 2013, at 6:52 PM, auggybendoggy wrote:

    HP is good for laserjets, other than that goodbye HP.

  • Report this Comment On October 13, 2013, at 7:45 PM, Lew3555 wrote:

    I just bought Windows 8 pro and upgraded. Boy, am I sorry I did. It was a waste of time and money. Luckily, I decided to keep Windows 7 on my computer too. Windows 8 was probably the biggest waste of $200 that I ever spent. Someday, maybe, someday Microsoft will get their crap together and not bring out products that are sub par. Someday, they'll learn to take their time before bringing out a crappy program. I would switch to another OS, but I'm not that familiar with them and don't want to waste more money on other programs. Please, Microsoft, please stop putting out crap.

  • Report this Comment On October 13, 2013, at 8:02 PM, patrick436 wrote:

    I think what many fail to recognize is that users are less afraid of using a computer with something other than Microsoft Windows or Microsoft Office. It used to be that people were afraid to use something other than MS. It started with the resurgence of the Mac OS over a decade ago, the popularity of mobile devices with the variety of OS's and versions that make people less afraid to try something different, and also the rise in popularity of very good and free/open source software like Linux Ubuntu, Mint, OpenOffice and Kingsoft Office.

  • Report this Comment On October 13, 2013, at 8:08 PM, notrozer1 wrote:

    First off Hp's tablet computers are all crap, looked on new egg and they all are atom processors... Of corse ill but the surface with an I5 intel

    2nd - hp was long playing with android before M$ made surface. So who broke the partnership?

    Also windows 7 is still for sale, buy it if you must

    Googles chromebooks dont cut it for me... no thanks

  • Report this Comment On October 13, 2013, at 8:47 PM, ipinsao wrote:

    HP should blame itself instead of pointing their finger on another company. Their PCs suck. Lenovo went from a nobody to a threat to both DELL and HP. Instead of blaming windows, PC manufacturers should just learn to understand that people no longer need to upgrade their PC's every year. Windows is not the problem actually it is so good that people who have been using Windows XP have not bothered to upgrade. A five year old PC can do more than enough of normal computing needs. Android is best use for games that's why I let my 5 year old have it. I use a PC for productivity. My next buy will be a Lenovo Yoga not an HP simply because their PC's suck.

  • Report this Comment On October 13, 2013, at 8:48 PM, GhostdogWarrior wrote:

    Starting to backfire???? How old is this article

  • Report this Comment On October 13, 2013, at 8:59 PM, JoeLemon wrote:

    I use to work for the company that did a lot of work for HP. We did a lot of there marketing hand outs, and a lot of there internal applications. Are company didn't have a single HP computer. HP computers just suck.

    Where the hell did you get the 70% number from. Windows Server is increasing in sales not decreasing even after a huge price increase.

    I work as a contractor. I work for 4-5 different companies a year. Every single company used windows for just about everything internal, which is where most software is. Every one used either windows + SQL Server or Unix + Oracle for the database server.

    You expect Microsoft to write the code to do EUFI for Linux. They are free to do it themselves.

  • Report this Comment On October 13, 2013, at 11:13 PM, Tony33334 wrote:

    Windows is still clearly the best for and many times the only choice for business, Where do they get this crap from. Windows 8 is pretty awesome. People hate that it does not open to the desktop, but that get fixed what tomorrow in the first service pack for W8. Google apps absolutely sucks, format of office products not quite fully compatible so docs and spreadsheets fail.

  • Report this Comment On October 14, 2013, at 9:49 AM, ozonesurfer wrote:

    I have been using Windows 8/8.1 Preview for a while. After making a few educated guesses, I figured out how to get around in it. My problems have been largely hardware issues, since my PC came out in the Vista era. The one way Microsoft screwed up is not putting a "help" feature on the initial screen for all the newbies out there. Ironically, I discovered that it's easier to use Google's Go language on my Windows 8.1 than on my friend's Linux. People are just allergic to change. Well, my friends, the only constants out there are God, change, and death... and whatever constants coders use. I believe in only going forward; when Windows 8.2 or 9 (whichever comes next), I'll probably get it. People tell me to go Linux, but life is too short to learn an OS completely from scratch. I tried its ancestor Unix and hated it; its commands made no sense. I'll take Word over vi any day. One last thing... don't think I use Microsoft exclusively. I don't have Visual Studio, but I just installed NetBeans.

  • Report this Comment On October 14, 2013, at 1:32 PM, widow8 wrote:

    MS's biggest mistake was to think sales of tablets and smart phones were replacing PC's.

    CPAs, bookkeepers, lawyers, doctors, researchers, banks, and corporate America can't do business on tablets. Smart phones may make me more effective / efficient while out of the office, but they'll never replace my desktop computer with dual 24" monitors and an ability to open & view 2 instances of Excel and an IDE or 2 IDE's simultaneously. And just what do app developers use for their development environment of choice?

    Try to open and view 2 instances of anything under Window(s)8. Heck Win95 was better at it and that’s why they called it WindowS.

  • Report this Comment On October 14, 2013, at 3:51 PM, testep02 wrote:

    In all honesty, how is it that Android is suppose to edge out Windows? Has Adobe released Photoshop and all of their other tools for Android? What about Autodesk? Can I use 3D Studio Max on Android? Where are mu Dev tools, like Netbeans and Eclipse? Can I get a full-feature Office suite (of any brand) on Android?

    Android does indeed have potential. However, users of Android aren't dreaming of the day they can go home and fire up Android on their desktop machine. It just wasn't made for that type of computing. Even developers (such as myself) will tell you that while the Android SDK is feature rich, it just wasn't meant for writing full-featured productivity apps. So, unless your day job consists of playing Angry Birds or posting pics with goofy effects to Facebook, I suggest you count on using Windows/Linux for a long time. And until Linux gets a bigger desktop following, Windows is the only alternative you have.

  • Report this Comment On October 14, 2013, at 3:59 PM, testep02 wrote:

    Not to mention the fact that 64-bit ARM processors are still few and far between. With 32-bit processors come the memory limits we went through with desktop PCs. Which means that adopting ARM on the desktop with Android, we are right back where we were 5-10 years ago. Not to mention Android itself still lacks 64-bit support.

  • Report this Comment On October 14, 2013, at 5:47 PM, imscythe wrote:

    No, it's not starting to backfire. For years, OEM's have been creating crappy laptops and they stopped innovating. It is clear that most of them lack creativity when Windows 8 came out. So Microsoft took it in their own hands and created Surface. Now, they feel threatened of which they are to blame, but like people who are forced to innovate they are slowly coming up with products that are decent for tablet-ultrabook experience.

  • Report this Comment On October 15, 2013, at 1:29 PM, JoeLemon wrote:

    I love how this web site likes to bash Microsoft, but this site is built on the Microsoft stack.

  • Report this Comment On October 15, 2013, at 5:34 PM, caseychester wrote:

    Joe - you just stole my comment! LOL

    I believe there are two types of computer users - content producers and content consumers. Prior to Windows 8, Windows has always been a good platform for content creators and that is likely why it is the standard for business. When you are editing a spreadsheet, writing email or developing software, you are creating content of some sort - much of what the world gets paid to do in their job.

    iOS and Android are both operating systems that are designed to be great a consuming content - not creating it so much. That is why i find these types of discussion pointless. These operating systems cannot be compared - they are apples and oranges.

    That brings me to Windows 8. To me, the biggest mistake MS made with Windows 8 was to try and develop one OS to rule them all. While I believe the same abilities in the content creation world are still alive and well in Windows 8, the additional functionality they added to try and make the OS a better content consumer are marginal at best.

    MS has some of the most talented developers in the world - and they have the capability to build some amazing software when their leadership makes good strategic decisions. I just wish they had used better judgement with Windows 8. They really need to have two different platforms - one for tablets/smartphones and another for desktops and strive to make each great for what they are primarily being used for.

    My $.02 worth.

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