Microsoft Really Wants You to Buy Windows 8

Microsoft is so eager to have customers update to its newest operating system that it's dropping support for the second most popular OS currently on the market.

Feb 15, 2014 at 9:12AM

Microsoft (NASDAQ:MSFT) wants customers to switch to its Windows 8 operating system so badly that it's willing to abandon nearly 30% of the entire personal computer market.

On April 8, Microsoft officially ends support for its Windows XP operating system, which according to Net Application as reported by USA Today, still held a 29.2% market share in January. That places the OS only behind Windows 7, at a 47.5% share, and well ahead of the two released versions of Windows 8, which have about a 10% share, according to the study.

What does no support mean?

On the plus side, nothing specifically terrible happens to a computer running Windows XP on April 8. The actual damage will be further down the road as Microsoft will stop creating system patches for the OS and will no longer issue updates that protect XP users from viruses. That may well be like letting a 10-year-old loose in a candy store as hackers -- always an opportunistic bunch -- likely won't follow Microsoft's lead and will continue making viruses targeting newly helpless XP users.

Microsoft explained the decision on is website.

"Microsoft has provided support for Windows XP for the past 12 years. But now the time has come for us, along with our hardware and software partners, to invest our resources toward supporting more recent technologies so that we can continue to deliver great new experiences…. Microsoft will also stop providing Microsoft Security Essentials for download on Windows XP on this date. (If you already have Microsoft Security Essentials installed, you will continue to receive anti-malware signature updates for a limited time, but this does not mean that your PC will be secure because Microsoft will no longer be providing security updates to protect your PC.)"

If you continue to use Windows XP after support ends, your computer will still work but it might become more vulnerable to security risks and viruses. Also, as more software and hardware manufacturers continue to optimize for more recent versions of Windows, you can expect to encounter greater numbers of apps and devices that do not work with Windows XP.

How much money is at stake?

Windows, which has had the same basic design since 1995, has been a huge source of profit for Microsoft. In 2011, according to CNN Money, "Windows brought in more than $18 billion in sales and $11.5 billion in profit. On its own, Windows would be big enough to place among the largest 150 U.S. companies by revenue, and its 62% profit margin would rank among the highest in the world."

That, of course, was 2011 and since that time, Microsoft's empire has shrunk. PC sales have declined dramatically and a large percentage of users have moved from the Windows-based PC world to iPads powered by Apple's (NASDAQ:AAPL) iOS or tablets running Google's (NASDAQ:GOOGL) Android.

Windows 8, which also powers tablets and phones (unlike the Apple and Google operating systems, which are specific to tablets) is Microsoft's attempt to keep users in its infrastructure. The theory is that while iPads and other tablets are tempting, users, especially business IT people, will want to have one OS for all their devices. If that proves true, it should help Microsoft grab a bigger share of the expanding tablet market shown on the chart below.

Statistic: Number of tablet PC users in the United States from 2010 to 2015 (in millions) | Statista
Find more statistics at Statista

Is it working?

While its market share compared to XP and 7 remains poor, there are signs that the strategy of having one operating system for all devices is winning a still small but growing share of the tablet market for Microsoft. in January was bullish on prospects for Windows 8, driven by the enterprise market (where Microsoft has always dominated).

"The stars are aligning in Redmond, and there's a good chance that Microsoft can lead the tablet race after being smothered by Apple and Android in 2013. Microsoft hasn't been in such a strong position for years," wrote Tom Kaneshige.

Microsoft also reported some good news in its Q1 2014 earnings reports. "Surface revenue grew to $400 million with sequential growth in revenue and units sold over the prior quarter," the company said.

Say goodbye to XP customers

"There is a risk," Microsoft spokesman Tom Murphy told USA Today. "How big a risk we can't quantify." But Murphy is unequivocal in advising consumers to part ways with the operating system that many have loyally stuck by all these years. "We're really black and white about that."

Clearly, it's too early to declare whether the Windows 8 strategy of one OS for all devices will work, but at least the news is more positive than it was when Windows 8 first launched. Another big step is whether some of the abandoned XP users will upgrade to Windows 8 devices (be they tablets or PCs) or leave for Apple, Android, or even devices running Google's Chrome operating system.

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Daniel Kline is long Microsoft. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

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