Microsoft needed a great Christmas season. After years of product stagnation, and a big market shift toward mobile devices from PCs, Microsoft's future relied on the company seeing customers demonstrate they were ready to jump in heavily for Windows8 products – including the new Surface tablet.
But that did not happen.
With the data now coming it, it is clear the market movement away from Microsoft products, toward Apple and Android products, has not changed. On Christmas eve, as people turned on their new devices and launched their first tweet, Surface came in dead last – a mere 2% compared to the number of people tweeting from iPads (Kindle was second, Android third.) Looking at more traditional units shipped information, UBS analysts reported Surface sales were 5% of iPads shipped. And the usability reviews continue to run highly negative for Surface and Win8.
This inability to make a big splash, and mount a serious attack on Apple/Android domination, is horrific for Microsoft primarily because we now know that traditional PC sales are well into decline. Despite the big Win8 launch and promotion, holiday PC sales declined over 3% compared to 2011 as journalists reported customers found "no compelling reason to upgrade." Ouch!
Looking deeper, for the 4th quarter PC sales declined by almost 5% according to Gartner research, and by almost 6.5% according to IDC. Both groups no longer expect a rebound in PC shipments, as they believe homes will no longer have more than 1 PC due to the mobile device penetration – the market where Surface and Win8 phones have failed to make any significant impact or move beyond a tiny market share. Users increasingly see the complexity of shifting to Win8 as not worth the effort; and if a switch is to be made consumer and businesses now favor iOS and Android.
Microsoft's monopoly over personal computing has evaporated. From 95% market domination in 2005 share has fallen to just 20% in 2012 (IDC, Goldman Sachs.) Comparing devices, in 2005 there were 55 Windows devices sold for every Apple device; today explosive Apple sales has lowered that multiple to a mere 2! (Asymco). Universally the desire to upgrade Microsoft products has simply disappeared, as XP still has 40% of the Windows market – and even Vista at 5.7% has more users than Win8 which has only achieved a 1.75% Windows market share despite the long wait and launch hoopla. And with all future market growth coming in tablets, which are expected to more than double unit volume sales by 2016, Microsoft is simply not in the game.
These trends mean nothing short of the ruin of Microsoft. Microsoft makes more than 75% of its profits from Windows and Office. Less than 25% comes from its vaunted servers and tools. And Microsoft makes nothing from its xBox/Kinect entertainment division, while losing vast sums on-line (negative $350M-$750M/quarter). No matter how much anyone likes the non-Windows Microsoft products, without the historical Windows/Office sales and profits Microsoft is not sustainable.
So what can we expect at Microsoft:
- Ballmer has committed to fight to the death in his effort to defend & extend Windows. So expect death as resources are poured into the unwinnable battle to convert users from iOS and Android.
- As resources are poured out of the company in the Quixotic effort to prolong Windows/Office, any hope of future dividends falls to zero.
- Expect enormous layoffs over the next 3 years. Something like 50-60%, or more, of employees will go away.
- Expect closure of the long-suffering on-line division in order to conserve resources.
- The entertainment division will be spun off, sold to someone like Sony or even Barnes & Noble, or dramatically reduced in size. Unable to make a profit it will increasingly be seen as a distraction to the battle for saving Windows – and Microsoft leadership has long shown they have no idea how to profitably grow this business unit.
- As more and more of the market shifts to competitive cloud businesses Apple, Amazon and others will grow significantly. Microsoft, losing its user base, will demonstrate its inability to build a new business in the cloud, mimicking its historical experiences with Zune (mobile music) and Microsoft mobile phones. Microsoft server and tool sales will suffer, creating a much more difficult profit environment for the sole remaining profitable division.
Missing the market shift to mobile has already forever tarnished the Microsoft brand. No longer is Microsoft seen as a leader, and instead it is rapidly losing market relevancy as people look to Apple, Google, Amazon, Samsung, Facebook and others for leadership. The declining sales, and lack of customer interest will lead to a tailspin at Microsoft not unlike what happened to RIM. Cash will be burned in what Microsoft will consider an "epic" struggle to save the "core of the company."
But failure is already inevitable. At this stage, not even a new CEO can save Microsoft. Steve Ballmer played "Bet the Company" on the long-delayed release of Win8, losing the chance to refocus Microsoft on other growing divisions with greater chance of success. Unfortunately, the other players already had enough chips to simply bid Microsoft out of the mobile game – and Microsoft's ante is now long gone – without holding a hand even remotely able to turn around the product situation.
Game over. Ballmer loses. And if you keep your money invested in Microsoft it will disappear along with the company.
Probably the best article I have ever read in my life; and I agree.
For the Desktop market, most people, including myself, are moving over to Linux based products like Ubuntu, I personally use Xubuntu, an Official version with a more ‘friendly’ GUI.
Microsoft should have stuck with Windows XP and simply charged for Service Packs. The world is changing, and Microsoft simply isn’t in the picture anymore.
…how are you disagreeing and saying there are no “facts” to support his position when there are many links to different articles and supportive statistical information? Try stepping up your reading skills before criticizing.
You know that Kindle is essentially Android? (but with the Google goodness removed and a locked down and inferior marked put in it’s place).
@Mike Frett – what do you mean by “most people,” exactly? last I checked, < 2% wasn't considered "most" o.0
“long-delayed release of Win8”
What? It shipped exactly on schedule. How do you come up with this bunk?
Hello there Mr. Hartung,
from a financial standpoint, this may all be correct.
However, from a technical standpoint, the world is still far too entrenched in Microsoft Windows and Office to allow the company to flounder any time soon.
Yes, Windows 8 is a flop – I have a Windows 8 tablet lying two feet away from me and would rather die than use it to type up this post. The unintuitive, undiscoverable UI is horrible and slows me down when I’m trying to work productively.
Office 2013 seems like 2010 with slightly different skin. New features? Broken PDF editing, and kills your entire Office-installation (i.e. 2010 will no longer install or work properly until you reinstall or at least repair Windows) if you uninstall it – but maybe that was just a coincidence :p.
So while these products may not be entirely solid, and PC/Windows sales as well as Office sales will most likely continue to plummet, it’s not the first time we’ve seen this… remember Vista? ME?
If MS fixes the shortcomings in Windows 8 with a service pack or Windows 9, we’ll see sales pick up again – if only for lack of a decent alternative. Linux isn’t viable as a replacement on the OS front, and the FOSS office suites are, well, catastrophic – I’ve been trying to use them every time a new version comes out, and every time I’m forced back to MS Office by strange bugs, annoying formatting issues (even without trying to open old MS Office documents!) and often even general slowness…
I doubt Microsoft will be disappearing any time soon.
Re: Simon Broenner, no one’s saying Microsoft is “doooomed”, but they *are* saying their past ability to dictate the market is evaporating. People are moving to tablets & smartphones for a lot of their day-to-day computing needs (email, web browsing, twitter, media consumption, ‘casual’ document creation), where MS has failed in spectacular fashion to gain any foothold.
They’re just another player in the game console market with Sony & Nintendo. The economy and the move to handheld devices are extending the turnover cycle for PCs as mentioned above. The Windows 8 release has made ME & Vista look like a good idea by comparison and accelerated people looking at alternatives. And finally BYOD in the business setting, where YOD is increasingly *not* a Windows PC, has to be impacting their enterprise revenues.
Overall MS has made a number of bad choices, which their warchest is going to be increasingly harder to fix.
These are bold and misleading predictions. It’s evident that Mr. Adam Hartung is clueless about what Microsoft really is as a tech company and its role in the technology world. I could not understand how he came up with misleading predictions if he truly understands Microsoft and its products. Here are some numbers to look at to help you paint the big picture:
OS Platform Statistics (as of December 2012 by W3C)
Win8 = 2,5%
Win7 = 55.6%
Vista = NT*
WinXp = 21.1%
Linux = 4.7%
Mac = 8.7%
Mobile = 2.2%
It’s still being dominated by Windows, I challenge you to go look for other statistics in the same context and I guarantee that whatever number they have, it is going to say that windows is still dominating the OS game as of this time.
Now back to windows 8 and the OS statistics above, how can the author predict that windows 8 will not follow the same path it has with windows 7 or windows xp this soon? How long did it take for windows xp users to upgrade to windows 7? Go check http://www.w3schools.com/browsers/browsers_os.asp and you would see that from December of 2009 to December of 2012, windows 7 users grew from 9% to 55.6% – that is 3 years in the making. It’s definitely too early Mr. Hartung to boldly claim that its game over for Microsoft or for windows alone.
If you are truly knowledgeable of Microsoft Mr. Hartung, you would have known by now that Microsoft have evolved from just making PC OS to making enterprise systems that run on windows “ecosystem”. You would also have known by now that Microsoft also gets significant amount of its revenue (Billions of USD) from other products like Microsoft SQL, Windows Server, Visual Studio and many more. Would you have any idea how many applications are running on .Net and how many personal and enterprise applications are currently being developed using .Net? For those who don’t know, .Net is a development framework developed by Microsoft that runs on windows platform. Majority of the fortune 500 companies’ enterprise systems are running on .Net.
Given all these information, how can it be game over for Microsoft in the next 3 years?
Throughout 2014 Linux will hit to attack the computer’s desktop and Microsoft has nothing in order to avoid on the desktop a similar success Linux has already inside the cloud, on servers, in supercomputing and inside the mobile world.
This will happen to another or certain future Home windows releases also, it took some time for people to proceed from XP to Windows 7 even people who skipped Vista. Also the various complaints surrounding Linux distro GUI’s.
They’ve been developingSsurface for 8 years, finally release it and attempt a weak sales pitch for it… What has happened to Microsoft….
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