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2/14/2014
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Microsoft Sells 200M Win 8 Licenses: Yawn

Microsoft touts sales of more than 200 million Win 8 licenses. Here are 5 reasons not to be impressed.

7 Mistakes Microsoft Made In 2013
7 Mistakes Microsoft Made In 2013
(Click image for larger view and slideshow.)

Microsoft sold more than 200 million Windows 8 and 8.1 licenses during the controversial OS's first 15 months, Tami Reller, the company's executive VP of marketing, revealed Thursday at a Goldman Sachs technology conference.

Sounds impressive, right? Not exactly.

Sure, 200 million is a big number -- that's about one license for every 35 people on the planet, a level of ubiquity most companies would kill for. But Microsoft isn't most companies. Put into historical or aspirational context, Windows 8 and 8.1 have underwhelmed.

Not convinced? Here are five reasons not to be impressed.

1. Windows 8 sales can't keep pace with Windows 7's precedent.
In January 2013, Reller, then CFO of the Windows division, said Windows 8 had sold more than 60 million licenses since launching the previous October. She said the pace roughly matched Windows 7's progress through the same period. In May, when Windows 8's license sales passed 100 million, Microsoft again said its new OS was performing comparably to Windows 7.

Microsoft's Windows 8 boasts have always been a bit suspect, but the company can no longer argue that Win 8 is selling as well as the previous version. Windows 7 license sales topped 240 million in the OS's first year of availability. In three more months, Windows 8 had moved only a little more than 80% as many licenses.

[Are Android apps coming to Windows? Read Microsoft's Windows Strategy Gets Muddy.]

2. Microsoft defines "sell" differently than most of us.
Microsoft's Windows figures refer to "sell-in" numbers, not "sell-through" numbers. Those 200 million Windows 8 and 8.1 licenses, in other words, derive from the volume sold to OEMs and retailers, not the number sold to actual end-users. The number of Windows 8 machines actually active in the wild is lower.

Microsoft's tally does not include volume licenses, such as those sold to enterprises. But analysts say volume deals have been sluggish, too.

Corporate Windows 8.1 uptake hasn't increased outside of isolated tablet projects, and even within mobility deployments, Windows 8 slates are activated less often than iPads, Forrester analyst David Johnson told InformationWeek last month. "Windows 8 and the enterprise aren't things you usually hear in the same sentence," said IDC analyst Al Gillen in a separate interview.

Microsoft's Windows 8 sales boast isn't as impressive as it might seem.
Microsoft's Windows 8 sales boast isn't as impressive as it might seem.

3. Some Windows 8 licenses are more valuable than others.
Windows 8 Pro launched at a promotional price of $39.99, but some Windows 7 users could purchase it for as little as $14.99. In February 2013, though, the Pro version jumped to $199.99, with the standard version coming in at only $80 less. Though Windows 8.1 was released last fall as a free upgrade to existing Windows 8 users, the $199.99 and $119.99 prices still stand for everyone else.

What's the takeaway? A lot of Windows 8 licenses were sold at a discount. In theory, this tactic shouldn't have hurt Microsoft's bottom line -- by sacrificing licensing revenue, the company hoped to encourage Windows 8 adoption and thus revenue for its new Modern UI app ecosystem. In practice, however, this hasn't worked out.

Here's part of the problem: Many early Windows 8 adopters installed the OS on older PCs that didn't have touchscreens and were ill-equipped for Win 8's touch-oriented Live Tiles. Win 8 also shackled the desktop with knuckleheaded UI changes such as the missing Start menu, which only exacerbated the issue.

Windows 8.1 was an attempt to assuage the user discontent that resulted from these problems, but the OS has mostly continued to flounder. Evidently aware that 8.1 wasn't enough, Microsoft is reportedly planning another Windows update to make its new UI friendlier to mouse-and-keyboard users.

4. Windows licenses don't drive device sales as they used to.
Reports last year claimed Microsoft offered OEMs cheaper Windows and Office licenses in exchange for ramped-up production of smaller Windows tablets. While such reports have never been verified, manufacturers have released a rash of Win 8.1 mini-slates in recent months, most of which come pre-loaded with Office. This suggests that just as Microsoft took an early hit with discounted Windows 8 licenses, the company might also have sacrificed upfront revenue to gain some of its more recent sales.

Regardless of behind-the-scenes negotiations between Microsoft and OEMs, many Windows 8 and 8.1 devices have sold well only following hefty price cuts. Microsoft presumably hopes these low-margin devices will eventually stimulate growth in more lucrative areas such as the Windows Store or Office 365 and other of the company's cloud-based services. But so far, much of Windows 8's modest momentum appears to have come at the cost of profit margins.

5. Windows 8 isn't popular on any form factor.
Microsoft apologists sometimes point out that Windows 8 was predestined to post lower sales numbers than Windows 7 because the latter had the benefit of following Windows Vista, whose infamous flop drove demand for a modern desktop OS. Some have also suggested Windows 8 adoption has been stunted by the slumping PC market. With more people using tablets, some older PCs aren't being replaced, and others are being pushed into longer lifecycles. Both trends, or so the arguments go, decrease demand for a new version of Windows.

While these arguments aren't completely invalid, they ignore an important point: Windows 8 was designed as both a tablet and desktop platform. If the OS had been more appealing, that should have insulated it from fluctuations in the traditional PC market.

Unfortunately for Microsoft, Windows 8.1 tablets are still living off Apple and Google's table scraps. A barrage of holiday sales might have helped Windows tablet makers move a few more units -- but they couldn't stop record iPad sales or the continuing proliferation of low-cost Android slates.

Even if the PC slump isn't Windows 8's fault, the OS clearly hasn't helped. In January, Windows 8 and 8.1 accounted for a measly 11.7% of all desktop users, according to Net Applications. Windows 7 runs on almost half of all desktops, and even Windows XP, which will lose support in less than 60 days, more than doubles Win 8/8.1's market share. More than 60% of Win 8/8.1 users are still running the earlier version, indicating that 8.1 hasn't done enough to motivate the market. To add insult to injury, HP has started selling Windows 7 PCs in a "back by popular demand" promo.

Put simply, Windows 8's failure is twofold: It isn't popular among Microsoft's legacy customers, and it isn't popular among the mobile-minded new generation of users.

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Michael Endler joined InformationWeek as an associate editor in 2012. He previously worked in talent representation in the entertainment industry, as a freelance copywriter and photojournalist, and as a teacher. Michael earned a BA in English from Stanford University in 2005 ... View Full Bio

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petey
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petey,
User Rank: Strategist
2/18/2014 | 10:13:16 PM
Re: Unbelievable
I've read information week for over 25 years. It is amazing the transformation of digital information during this time. Even further, this transformation has exploded this past 6-7 years and I expect this trend to continue. Companies like Microsoft, while dated, in the eyes of this generation, are the foundation for this revolution. Not that their products are or were ever perfect, I think it's important to realize just how much of today's technology depends on their products. I think we take for granted how well some of these older tech companies have integrated their products. This is not about win 8 taking over the world, but more about ms still being profitable and viable all these years later given their legacy status. I'm impressed.
Michael Endler
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Michael Endler,
User Rank: Author
2/18/2014 | 9:57:22 PM
Re: "Failure" seems a bit much
I'll concede that one, Joe. I stand by "underwhelming," which I think the analysis supports, but "failure" is too harsh, at least at this point. I think Microsoft can still turn it around, but we're reportedly at least an update away from a tenable model for balancing the Modern and desktop UIs-- and that's only if the alleged "Threshold" updates are a) real, and b) more motivating to customers than Windows 8.1 has been. It will take a while to wrestle market share away from iOS and Android, as you pointed out, but Microsoft can't afford to move at a glacial pace forever. Microsoft might not have totally failed with Win 8, but given the intrinsic advantages the company wields and the aggressive manner in which it has tried to push the new OS, Windows 8's achievements to date have to fall on the lower end of the expectation spectrum.  
Michael Endler
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Michael Endler,
User Rank: Author
2/18/2014 | 9:48:57 PM
Re: Unbelievable
No disrespect taken, petey, I suppose it's a fair enough question, and I appreciate your active participation in the conversation. The article wasn't necessarily meant to be legacy-defining, though. ;)

Benjamin Disraeli is alleged (by Mark Twain, rather apocryphally) to have said, "There are three kinds of lies: lies, damned lies, and statistics."

Regardless of the phrase's true authorship, I generally agree with its commentary; numbers are used all the time to mislead. As you rightly suggested, it's not an issue of life or death in this case, but the point remains: A lot of statistics get simplified, especially when companies use them for marketing purposes. Granted, Microsoft revealed the 200M figure in fairly low-key fashion this time-- but they (like most big companies) have been guilty before of trying to pass off creative accounting as legitimate financial successes.

Some customers are appropriately skeptical of these statistics, but others not only accept them, but also use them to make purchase decisions, or to otherwise inform their opinions about a certain product or company. As a result, I find it useful to examine provocative statistics from multiple angles, and to encourage a healthy conversation (like we are fortunate enough to have here) about what the numbers actually mean. To some people, 200 million sounds unequivocally impressive under all circumstances. But this is demonstrably not the case; the value of a number is usually, if not always, contextual. What is the appropriate context in this case? Well, that's what I attempted to answer with the article.

Also, if recent InformationWeek comments threads have shown everything, it's that our readers are passionately divided about whether Windows 8 is any good, and whether tablets are really surpassing PCs in relevance. It's fun water cooler discussion, and this article was intended to tap into this vein. If people are going to have "Mac vs. PC" or "Windows 8 vs. Windows 7" or "tablet vs. laptop vs. hybrid" arguments anyway, I hope articles like this one can enrich the debate!

Also, just to make sure I wasn't understood (per #3 in your mesage), the point was not that Microsoft is dying. Outside of Windows, most of the company is actually doing really well. But Windows has been a traditional cornerstone of the company. I don't think Windows is going to die, per se, but it's changing in relevance, which means the whole company's emphasis is changing. I think this is relevant to many people who use Microsoft products, especially those with investments that will be impacted by the company's future strategies.
rradina
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rradina,
User Rank: Ninja
2/18/2014 | 6:07:17 PM
Re: 100 million since may 2013
Regarding the work-arounds (Start8 and ModernMix), why haven't more folks customized their systems with these tools rather than dissing Win8 and searching for deals on Windows 7?  If one is sticking with Windows, Win8 fitted with these tools is as good or arguably better than Win7.  Some of the modern apps (for instance Netflix, some games, Kindle, Nook, etc.), are even good on touch-challenged desktops.
danielcawrey
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danielcawrey,
User Rank: Ninja
2/18/2014 | 4:46:46 PM
Re: Unbelievable
I'm sorry, but the real reason why Microsoft has to fudge around these number is because of the fact that Windows 8 is just not a very good OS. I applaud them for trying something different, but as a very mass market product this version is just not very good. 

Windows 7 was much better because it was built specifically for a PC. Windows 8 is not sure what it wants to be. 
Brian.Dean
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Brian.Dean,
User Rank: Ninja
2/18/2014 | 4:41:43 PM
Re: 100 million since may 2013
The UI is a big issue. If Microsoft had gone with the model of conditioning users from a win7 UI to a win8 tile UI then it would have allowed them to gain some data on whether users actually wanted it, but the model was to hit everyone with an alien UI out of the box. After using a PC for so many years, I found it difficult to navigate.
rradina
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rradina,
User Rank: Ninja
2/18/2014 | 8:45:58 AM
Re: 100 million since may 2013
Do you think the issue is awareness or cost?  

Once the special offer grace periods expire, most do not approve of Microsoft's upgrade fees.  A number of folks seem to refuse Windows 8 on the principle of not wanting to pay for an upgrade and then pay even more for a fix.
Whoopty
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Whoopty,
User Rank: Ninja
2/18/2014 | 7:08:33 AM
Stats
Game developers use similar stat blurring to make them seem more successful. They talk about games "shipped," which sounds impressive, but in reality just means ones sold to retailers - it has nothing to do with consumer purchases. 
Joe Stanganelli
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Joe Stanganelli,
User Rank: Ninja
2/17/2014 | 11:42:07 PM
"Failure" seems a bit much
I'll stipulate to "underwhelming," but I'm not sure "failure" is the right word here.  Rome wasn't built in a day, and it's all part of Microsoft's mobile strategy of integration -- and it will take some time to wrest the power away from Android and iOS.

Besides which, no doubt the release of 8 has helped provide a much-needed kick in the pants to get customers to migrate from XP to at least 7 -- where threats to cut off support have not worked.
awebb199
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50%
awebb199,
User Rank: Strategist
2/17/2014 | 9:20:15 PM
Re: 100 million since may 2013
We mostly agree on the facts of the matter. 

But you insist the glass is half empty because the glass filled faster last time, and Microsoft wanted the glass to fill faster than it did.  That is the translation of  "Put into historical or aspirational context, Windows 8 and 8.1 have underwhelmed."

 

 

 
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