Less than a week ago, Microsoft Corporation (NASDAQ:MSFT) cut the price of the Surface RT to $350 (a 30% discount). This comes just weeks after Dell Inc. (NASDAQ:DELL) made a similar move with its own Windows RT device.
At this point, it seems as though Windows RT has been nothing short of a colossal failure for Microsoft Corporation (NASDAQ:MSFT), drawing into question the long-term viability of the Windows operating system.
Windows RT vs Windows 8
It’s important to note that Windows RT is not the same as Windows 8. Although they look the same from an interface perspective, they run very different software.
The key difference is that Windows RT is designed to run on ARM-based chips (the sort found in tablets and smartphones), while Windows 8 runs on the traditional x86 processors made by Intel Corporation (NASDAQ:INTC) and Advanced Micro Devices, Inc. (NYSE:AMD). Windows 8, then, is capable of running just about any PC software made in the last 15 years; by contrast, Windows RT is restricted to mobile apps, the apps you find in the Windows app store.
And therein lies Windows RT’s fundamental problem: the lack of apps. On a pure numbers basis, Microsoft’s app store is far behind both Google Inc (NASDAQ:GOOG)’s Play and Apple Inc. (NASDAQ:AAPL)’s iTunes. More importantly, it lacks a number of key apps like HBOGO, LinkedIn Corp (NYSE:LNKD), and even Facebook Inc (NASDAQ:FB).
Admittedly, the Facebook Inc (NASDAQ:FB) app is on its way. But with Windows RT nine months old at this point, the fact that there’s still no official Facebook Inc (NASDAQ:FB) app illustrates just how weak developer support is for the platform.
Can a price cut save Windows RT?
Will consumers forgive Windows RT’s lack of apps if it means they get a far cheaper device? Possibly, but I doubt it.
Even at $350, the Surface RT is still more expensive than smaller tablets like the Nexus 7 ($250), Kindle Fire HD ($200), and most notably, Apple Inc. (NASDAQ:AAPL)’s iPad Mini. The fact is, even $350 may be too much for a tablet. Estimates suggest that Apple Inc. (NASDAQ:AAPL)’s iPad Mini may now account for 60% of the iPads sold, meaning that the market for full-sized tablets (like the Surface RT) isn’t particularly large.
Microsoft Corporation (NASDAQ:MSFT) has run an aggressive ad campaign pitting its own Surface RT and Dell’s tablet against the iPad, and while they could spark some consumer interest, I think it’s most telling to observe the actions of Microsoft Corporation (NASDAQ:MSFT)’s other hardware partners.
Both Hewlett-Packard Company (NYSE:HPQ) and Samsung Electronics Co., Ltd. (KRX:005930) appear to have a very low opinion of Windows RT — neither company offers a Windows RT device in the US.
Instead, both companies have opted to go with Google Inc (NASDAQ:GOOG)’s Android on their tablets, while also offering some hybrid tablet/Ultrabooks running full Windows 8. Interestingly, Samsung Electronics Co., Ltd. (KRX:005930) is actually selling a hybrid tablet that runs both full Windows 8 and Android.
As I’ve previously written, this demonstrates just how much faith Samsung Electronics Co., Ltd. (KRX:005930) has in the Windows app store — that is to say, no faith at all. By incorporating Android apps into the Windows experience, Samsung Electronics Co., Ltd. (KRX:005930) is compensating for Microsoft Corporation (NASDAQ:MSFT)’s mobile weakness.
As for Hewlett-Packard Company (NYSE:HPQ), its move away from Windows shows just how eager the company is to shed its image as a Windows OEM. Short seller Jim Chanos targeted Hewlett-Packard Company (NYSE:HPQ) last year, arguing that the company’s reliance on the PC market would be its undoing.
Chanos reiterated that call earlier in the week at CNBC’s Delivering Alpha, and perhaps he’s right. Last quarter, Hewlett-Packard Company (NYSE:HPQ)’s PC shipments declined a staggering 20%. But with the move to Android and the focus on servers and other business segments, Hewlett-Packard Company (NYSE:HPQ) clearly understands that the Windows ecosystem has a dire future.
What does Windows RT’s failure mean?
With the failure of Windows RT, Microsoft’s future in the tablet industry is all but doomed. Granted, Microsoft still offers something no other company does — the hybrid tablet. But the market for such a device is relatively small, and will likely remain small for the foreseeable future.
As with smartphones, the tablet market seems poised to remain a two-horse race for the foreseeable future: Apple’s iOS against Google Inc (NASDAQ:GOOG)’s Android.
Apple Inc. (NASDAQ:AAPL)’s tablet market share has fallen, and should continue to fall, in the coming years. With Google Inc (NASDAQ:GOOG) giving Android away for free, Apple Inc. (NASDAQ:AAPL) simply cannot offer super cheap tablets like Hewlett-Packard Company (NYSE:HPQ)’s $170 Slate 7.
Still, the failure of Windows RT should benefit Apple in the near term. Although Google Inc (NASDAQ:GOOG) wins on customization and price, Apple Inc. (NASDAQ:AAPL) maintains its spot as the only company offering a premiere tablet experience.
Ultimately, although the iPhone remains the company’s workhorse product, Apple’s long-term future may lie with the iPad. With Windows RT falling by the wayside, that’s one less competing platform Apple need worry about.
Investing in Microsoft
If you’re holding Microsoft stock, you have to believe that the company will be able to replace its Windows empire with something else. That it isn’t to say that it can’t; hedge fund ValueAct argued that Azure, Microsoft’s public cloud product, will more than makeup for the decline of Windows.
But the failure of Windows RT suggests that Microsoft has no future in the mobile computing market. There will likely be desktop and laptop PCs running Windows for many years to come, but as more and more users switch to mobile devices, Microsoft’s Windows business will struggle.
The article Confirmed: Windows RT Is a Total Failure originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.
Joe Kurtz has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. Salvatore “Sam” is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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