Windows 8 : Titanic Consequences

I wrote an article back in 2012 simply titled: Windows 8: A New Beginning or the Beginning of the End... in which I made a bold prediction that Windows 8 could single-handedly sink the entire desktop computer industry. Now, I'll admit some of what I wrote was a bit sensationalist as the desktop computer industry was already in somewhat of a free-fall (arguably, caused by MS slow update cycles and reluctance to innovate), but the theory behind the article was sound and true. Redmond made a huge gamble on Windows 8, dragging their partners helplessly along for the ride, without considering the complete ramifications of what a failure could mean. 

  Yesterday, both Garner and IDC release some rather gloomy numbers for first quarter PC shipments--shipments were down 14% (the lowest drop in history), and the research firm IDC dropped the blame for these numbers squarely on Redmond's doorstep, actually quoting a statement I made almost a year ago calling it, "The Perfect Storm". While 14% may not seem like a huge number to some people, it is an absolutely frightening number to an entire industry, mind you, the 14% downturn is the number of PC's shipped to retailers and partners, and it's a comparison to what an all ready ailing market was doing just last year. These are not sales numbers, but it doesn’t take a genius to know if your shipping less you selling a whole lot less. 

  The short-sited release of Windows 8 did not take into account that Microsoft's partners: Dell, HP, Acer, Lenovo, etc...were already suffering from quarter after quarter of stagnant and flat sales. Flat sales mean revenue loss, a drop in sale, well that means, catastrophe in an industry that already has razor thin margins. Point blank, Microsoft is suffocating its partners to death, and that is not an exaggeration! Michael Dell, in recent months, has been trying to reverse the course of his company by attempting the impossible--taking a struggling public company and returning them back to private company status, spending his own money in that process. 

  Michael Dell is smart. He has long understood the dangers of having his company's success or failure being tied solely to one partner, consequently Dell has attempted numerous times at incorporating new OS partners to run their hardware (Dell has sold Linux laptops, and tried unsuccessfully to sell Steve Jobs on a limited Apple, Dell partnership), but none of these attempts have been successful. Michael Dell also understands the tough changes that has to be made will be incredibly difficult while the company is publicly traded, but the concept of taking a public company back to a private company is like trying to make a river change course, it's a long shot to say the least. The bigger problem for all of Microsoft partners is the world has gone mobile, and not any of these companies are major players in that market. 

  The mobile Market, right now, is really a two horse race between Samsung and Apple. Consequently, Microsoft's partners have hitched themselves, once again, to Microsoft’s engine to carry them into the future on the mobile front; a decision that has these companies bleeding in their primary market (desktop) and their secondary market (mobile), as the adoption rate for Windows 8 in the mobile/tablet front has also been poor. So, where does that leave the Microsoft OEM Partners? Unfortunately, it doesn't look good long term for any of these companies, except for maybe Lenovo (a Chinese company), which has shown some ability to be adaptable. While Acer and others have released Android tablets, it's been pretty obvious that Apple is the major player in the tablet game with about 70% market share, and the other OEM's are simply cannibalizing each other and having very little affect on Apple’s dominance. HP, of course, does have other revenue streams that are not tied directly to Microsoft, but they are tied indirectly to overall PC sales. Peripherals are not immune to winds of change; in fact HP will soon have to find its “new self” as the market rushes quickly into the post-apocalyptic-pc era.

Is Microsoft to blame for all of this? The answer, of course, is no. But, Windows 8 is the Titanic or the iceberg in this real life allegory—and although they (Microsoft) may have enough lifeboats (money) to save themselves their partners are indeed on a sinking ship hoping Captain Ballmer is not related to Captain Edward Smith. Personally, I believe that Ballmer has a second career as an author in his future—“How to Destroy a Mega Corp and Sink an Entire Industry for Dummies”. It sounds like a best seller to me. 

Corey Spearman