Samsung Signals More Trouble for Windows 8

Microsoft positioned Windows 8 as the cornerstone of a major refresh of its entire product portfolio, intended to propel the company into the mobile market and recapture lost momentum among consumer and business customers. Critics say the exact opposite is happening, and they’re calling for change.

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Windows 8 Broken Glass

At Microsoft Corp.'s TechForum in Seattle last week, Craig Mundie, chief research and strategy officer, basically blamed the company’s competitive woes vs. rivals Apple Inc. and Google Inc. on its OEM partners, saying inconsistent product designs and, consequently, user experiences reflect poorly on Microsoft.

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Surface, he said, was Microsoft’s attempted to prove that a tightly integrated, fully functional hardware product could be built based on Windows. The development of Surface, he explained, was a reversal of years of Microsoft apathy toward product form-factors; Microsoft designed software while OEMs such as Hewlett-Packard Co., Dell Inc. and Samsung Electronics Co. built the machines.

"It turns out we had all four categories of devices [music players, touch devices, phones, and tablets] in the market place, more than one year or two years before Apple even did their first one, but for a whole variety of reasons -- just business choices we made at the time -- we didn't end up capitalizing,” Mundie said.

So far, Microsoft is standing by Surface and the Windows 8 platform, believing the two make a winning combination. The focus on OEM design that complements its operating system, Microsoft says, will improve the customer experience, particularly in ultrabooks and touch-screen notebooks.

Microsoft’s confidence isn’t exactly permeating through its OEM partners. All PC manufacturers that were long-time loyal partners to Microsoft were upset with the debut of Surface. Acer Inc. was vocal, and now Samsung is speaking out against Windows 8 and Surface. The South Korea-based company is discontinuing sales of its Windows RT tablets in Europe and says Windows 8 is slowing the PC market.

“The global PC industry is steadily shrinking despite the launch of Windows 8,” said Jun Dong-soo, president of Samsung’s memory chip division, in a press meeting last week. “I think the Windows 8 system is no better than the previous Windows Vista platform.”

He added, “[Microsoft's] rollout of its Windows Surface tablet is seeing lackluster demand. Meanwhile, previous vigorous pitches by Intel and MS for thinner ultra-books simply failed and I believe that’s mostly because of the less-competitive Windows platform.”

Next week, Intel will host partners and OEMs at its annual Solutions Summit in Los Angeles, where ultrabooks, tablets and embedded systems will figure high on the agenda. Intel has placed big bets on Windows 8’s success as a catalyst for adoption of processors and chassis. Analysts will be watching whether Intel will continue to press Windows, or will embrace alternatives.

OEMs are making their choices. While major manufacturers have committed to Windows 8 on new all-in-one desktops, notebooks and tablets, they’re more enamored with Google’s Android for mobile devices and, increasingly, Chrome for notebooks. Hewlett-Packard, Lenovo, Samsung and Acer manufacturer Chromebooks, and Samsung is the world’s largest smartphone and second largest tablet vendor thanks to Android.

Critics say Microsoft has priced Surface too high to make it a major contender. Since the Windows RT version launched in October, Microsoft has sold between 600,000 and 1 million units; official figures are hard to come by. Microsoft CEO Steve Ballmer says he’s happy with Surface sales, saying the goal is quality not volume. Analysts say that users could just as easily get a 64 GB Apple iPad for less than the average Windows RT unit and more than half the price of an equivalent Surface Pro.

Likewise, critics say Microsoft is hurting the PC market by forcing changes users simply didn’t want, most notably the title interface and the elimination of the vaunted Start button. Many users have found ways to start up Windows in desktop mode (sans Start button), but many are simply frustrated by the new navigation scheme.

In an interview with CNET, IDC analyst Bob O’Donnell called Windows 8 sales “horribly stalled,” and says Microsoft is considering making changes to Windows 8 to make it more acceptable to consumers and businesses. However, he adds, the changes are part of an ongoing debate inside Microsoft and, in the end, the company may stick to its plans despite objections.

Microsoft isn’t oblivious to its challenges. Last week it announced a price cut to Windows 8 Pro licensing for OEMs. The intent is to make Windows 8 a little more financially palatable to device manufacturers.

To be fair to Microsoft, Windows 8 isn’t the only problem plaguing the PC market. Desktop and notebook sales fell between 6 and 8 percent last year under pressure from the migration to smartphones and tablets. Where critics say Microsoft must take responsibility is the 11 percent plunge in notebook sales over the critical holiday season, while sales of Apple iPad and Android-powered tablets soared. Critics point to this metric as evidence that Windows 8 failed to curb the tablet trend.

All of this adds up to trouble for the solution-provider community. Microsoft reseller partners at the Worldwide Partner Conference last July complained they weren’t being given access to information, beta product or marketing materials for many of Microsoft’s leading products, including Windows 8. The instability in the OEM market could result in changes or doubt that will stall partners from investing or supporting the platform.

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