Microsoft needs a hit with Windows 8
10/19/2012 6:28 PM EDT
Microsoft's subpar earnings announcement this week—the company's profit dropped 22 percent compared to the year-ago period—underscores what is at stake for the software giant with the launch of its latest operating system.
It seems strange to think that Microsoft—not long ago the world's biggest company—could be desperate for a hit. Previous Windows launches were an automatic boost for Microsoft and the PC market, whether users like the new OS or not. But the world has changed, and this time around it could be different.
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According to Allan Krans, a senior analyst at consulting firm Technology Business Research Inc. (TBR), Microsoft is in no danger of slipping into a revenue free-fall. But Microsoft's fiscal first quarter results point to the importance of Windows 8 for the firm's long-term health, Krans said.
Krans doesn't expect Microsoft to see high growth immediately after the Windows 8 launch, which is set for Oct. 26. The continued use of prior Windows operating systems will delay the initial adoption of Windows 8 in enterprises. Krans believes it could be two years before Windows 8 sees widespread adoption by enterprises.
The Windows 8 start screen, featuring application tiles.
Microsoft's best prospects for significant near-term growth will be in the consumer space, from mobile device like tablets, according to Krans. With improvements in cloud storage technology and the anticipated launch of Microsoft's Surface tablet next week, Microsoft will continue incorporating Windows 8 with mobile and cloud capabilities to drive its adoption in consumer mobile devices, he said in a report circulated this week.
But the success of Windows 8 in mobile devices—where it faces a formidable competitor in Android—is not assured. The new OS is a dramatic departure from previous version and the most dramatic update of the OS in nearly two decades, initial reviews have been lukewarm.
It's practically inevitable that Windows 8 will eventually enjoy major adoption by enterprises. But in the consumer space, the battle has yet to be fought. Meanwhile, the PC market is in a free fall, with shipments projected to decline this year for the first time since 2001 and talk that shipments of the PC as we know it have peaked.
With the winds of change swirling and competition emerging from unexpected areas, mighty Microsoft needs Windows 8 to be a hit if it wants to continue to be a dominant player in the post-PC era.