Microsoft's Windows 8 Numbers Meaningless

Microsoft this week tried to mute reports that Windows 8 is off to a slow start, disclosing that it has sold about 40 million licenses for the OS since launch. Microsoft says that's on par with the debut of the highly successful Windows 7. But without additional context, which Redmond refuses to provide, the numbers are meaningless.

The most important fact that can't be gleaned from Microsoft's "disclosure" is the extent to which Windows 8, available to consumers since Oct. 26 and to businesses since mid-August, is driving new hardware sales. Microsoft may have sold millions of Windows 8 licenses to PC makers, but if their touch-tablets, convertibles and all-in-ones are languishing on store shelves or in warehouses, that doesn't bode well for the operating system's future.

We don't know because Microsoft isn't saying. We don't know how many of the 40 million licenses come from low-cost upgrades, from volume licensing sales that kick in automatically, or from direct sales to consumers. And we don't know how many of the 40 million licenses are sitting on systems that have yet to find a buyer.

If upgrades represent the vast majority of those licenses, that's something Microsoft could be pleased with, as it puts Windows 8 onto the desktops of millions of users. But at a cost between $15 and $40, depending on when the PC was purchased, upgrading to Windows 8 is a pretty low-risk proposition for most users. We don't know whether upgraders liked the OS, whether they kept using it, or if they later reverted to Windows 7 -- and that's a metric I'd like to see.

So why won't Microsoft provide a breakdown? What is it hiding? Its silence speaks volumes or, perhaps more accurately, low volumes.

I can clear up what has been one source of confusion about the 40 million. Reliable sources tell me it does not include copies of Windows 8 installed on Surface tablets, so at least Microsoft is not counting licenses that it, in effect, sold to itself.

It's worth noting that Microsoft deferred considerably more Windows revenue in the quarter prior to Windows 7's launch than it did for Windows 8. For the former it was $1.5 billion, for the latter about $1.2 billion.

Deferrals reflect the value of Windows presales and upgrades that Microsoft believes it will have to make good on in future quarters. An apples-to-apples comparison is difficult. Still, the deferral numbers are worth looking at in the absence of more data from Microsoft.

Regardless of whether you believe Windows 8 is off to a slow or fast start, one thing became clear this week. Microsoft plans to give the platform plenty of rope. In a previous column I suggested that the company might ultimately pull a Coke and introduce what I called "Windows Classic" if Win8 and the Metro interface don't catch on with users. Windows Classic could include all the security and manageability benefits of Windows 8, but lose Metro (also called Modern UI), which many users find confusing.

Not so fast, said Tami Reller, who was named co-chief of Microsoft's Windows unit following Steven Sinofsky's sudden and unexpected departure earlier this month. Reller said Microsoft is into Windows 8 and Metro for the long haul.

"Windows 8 represents really a generational shift of hardware, a generational shift of the operating system and apps, all together, all at once," said Reller, who spoke Tuesday at the Credit Suisse Tech Conference in Scottsdale, Ariz. The OS "was built for the future, not just any one single selling season," said Reller, whose comments may also have been meant to dampen expectations about holiday sales.

At this early stage, you wouldn't expect her to say anything else, at least not publicly. But I'm not convinced. If sales of Windows 8 tablets and laptops are tanking by this time next year, the company will have to come up with an alternative. We may yet see Windows Classic. Do you think Microsoft should stick with Windows 8 and Metro? Let me know in the comments section below.

Upgrading isn't the easy decision that Win 7 was. We take a close look at Server 2012, changes to mobility and security, and more in the new Here Comes Windows 8 issue of InformationWeek. Also in this issue: Why you should have the difficult conversations about the value of OS and PC upgrades before discussing Windows 8. (Free registration required.)