Microsoft’s problem is that Windows 8 is not leading an expansion into the smartphone and/or tablet markets, while it is, at the same time, alienating its loyal base of customers. It is becoming clear that, at least for the moment, consumers prefer smarphones/tablets and computers to have different operating systems. Steve Ballmer’s dream of customers moving from computer to smartphone to tablet all with one operating system, while innovative, does not seem to be a winner (this is somewhat confirmed by the Apple Inc. (NASDAQ:AAPL)’s success in all three of these markets while using different operating systems).
To add to its growing list of problems, Microsoft Corporation (NASDAQ:MSFT)’s PC sales are already down 14 percent in the first three months of this year, one of the sharpest drops on record. In addition, approximately half of the company’s profits come from sales of Windows licenses. While sales of these licenses have held up so far, it seems unlikely that this will continue into the future due to the customer dissatisfaction mentioned previously. Fortunately, Microsoft acknowledges these challenges and is trying to make changes to Windows 8. A new version is due to come out soon—one that retains use of the popular “Start” button.
However, even if consumers are more appreciative of this updated version of Windows 8—codenamed “Blue”—there is much to suggest that Microsoft Corporation (NASDAQ:MSFT) has a more deep rooted and longer-term problem. This is, paradoxically, a problem rooted in their own success. Microsoft is very good at creating operating systems for PCs. Consequently, this has been the focus of the company for most of its existence. It was slow to enter the search engine market in the 1990’s and it has been slow to enter the markets for smartphones and tablets because of this while allowing Google Inc (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL) to gain huge advantages in these markets. Windows 8 is Microsoft’s attempt to become competitive in these markets, but its clumsy software is evidence of a company that is out of its depth, at least for now. This is extremely important and a significant problem for Microsoft Corporation (NASDAQ:MSFT) because consumers are increasingly choosing smartphones and tablets over desktop computers and laptops. Microsoft can likely make Windows 8 more appealing to customers, but its small presence in the smartphone and tablet markets will be tough to overcome.
Abbey Monnin has no position in any stocks mentioned. The Motley Fool recommends Apple Inc. (NASDAQ:AAPL). The Motley Fool owns shares of Apple and Microsoft Corporation (NASDAQ:MSFT).
The article Windows 8 Represents a Real Problem for Microsoft originally appeared on Fool.com.
Abbey 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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