Windows 8.1 Update: Can It End The Rut?

Windows XP Shutdown: 10 Facts To Know

This spring, Microsoft will release a Windows 8.1 update intended to make the touch-oriented OS more agreeable to mouse-and-keyboard users, and to enable OEMs to produce cheaper devices of all form factors. Based on the newest market-share statistics, it's easy to see why the company is pushing these angles: Despite recent device price cuts and Windows 8.1's improvements, Microsoft's newest OS continues to perform modestly, on both tablets and PCs.

Research firm Gartner reported Monday that Windows tablets accounted for just 2.1% of the market in 2013, compared to 36% for iPads and almost 62% for Android slates. This figure is actually worse than the meager 3.4% Windows share that IDC estimated in December.

[Is Windows really losing share to Chrome OS? Read Where Are All The Chromebooks?]

Gartner found that Windows tablets more than doubled both in shipments and market share in 2013, a period during which iPads increased shipments by only around 14.5% and lost share overall. But given Microsoft's lowly starting position and late entry, this growth wasn't much of a victory. Android expanded at an even faster rate, and iPads, despite trailing overall market growth, maintained a stranglehold over the most lucrative segments. They also ended the year on an upward note, thanks to the introduction of new models.

"Apple's tablets remain strong in the higher end of the market, [forcing] vendors to compete with full ecosystem offerings, even in the smaller-screen market as the iPad Mini sees a greater share," Gartner research director Roberta Cozza said in a statement. Gartner noted that Windows has better share among productivity-oriented mobile devices but has "failed to capture major consumers' interest on tablets."

The OS's status is somewhat better on the desktop. According to web-tracking firm Net Applications, Windows 8 and 8.1 combined for 10.68% of desktop users in February, up slightly from January. Despite Microsoft's recent efforts to move customers off of Windows XP, which will lose service next month, the 10-year-old OS still commanded 29.53% of the market. February was the second consecutive month in which Net Applications recorded an increase in Windows XP usage. Windows 7 continued to lead the market, with more than 47% of desktop users.

Windows 8 and 8.1's 10.68% share isn't insignificant. All Mac OS X users combined represent only 7.68% of the market, meaning millions more people are running Windows 8/8.1 than are using any type of Apple PC. Nevertheless, Microsoft's newest OS trails earlier versions' precedents by a significant margin.

Indeed, the Net Application figures indicate troublingly soft Windows 8.1 adoption. The update is free to all Windows 8 users, but nearly 60% of Win 8/8.1 users are still running the original version. Given that Windows 8.1 addressed many of the complaints that limited demand in the first place, such indifference is surprising.

The coming update could help Microsoft increase Windows 8.1's share, especially in emerging markets where low-cost Android devices are particularly popular. A similar optimism seemed valid back in July, when Windows 8.1 was confirmed and Windows 8 controlled a paltry 5.4% of the desktop market. Since then, that user base has almost doubled, with growth trailing off over the last few months.

If the new update achieves a comparable result, Windows 8/8.1 could have close to 20% of the desktop market (which includes traffic from Windows 8.1 tablets) by this fall. That's certainly a formidable figure for almost any company -- but it would still represent only two-thirds the share that Windows XP has retained while sitting on its deathbed.

It would also leave Microsoft a distant third on the mobile scene. This problem isn't limited to the consumer markets. iPads dominate enterprise tablet deployments to almost the same degree Windows machines dominate in PCs. There's still money to be made in third place, especially for a company as diversified as Microsoft. But again, compared to historical precedents and the company's admitted ambitions, this sort of progress doesn't measure up.

For reference, Microsoft handled threats from netbooks much more effectively than it has tablets. "Most early netbooks tended to run Linux, but as they gained acceptance in 2008, more and more manufacturers offered them with Windows, and now Windows runs on 70% of netbooks sold," InformationWeek's Charles Babcock wrote in 2009. "That may seem like a lot, but Microsoft is used to market share of greater than 90% on PCs, and its margins on netbooks are lower."

For many Windows 8.1 devices, margins are likely even lower than during the netbook boom, which explains the stream of mostly unconfirmed reports that Microsoft has slashed license costs for OEMs. Rumors, some from reliable sources, also claim Microsoft is entertaining even more radical Windows changes, including a free version of Windows designed to monetize Bing and other services, and a version that runs both Android and Windows apps. Such rumors have popped up before, but given that the influx of new Windows users has decreased alongside margins, the claims aren't as surprising as they once were.

Whether Microsoft adopts such seemingly unlikely tactics will depend on not only the new leadership regime settling in under CEO Satya Nadella, but also the performance of the upcoming update. If low-cost devices and another update increase adoption of Microsoft services such as OneDrive and Office 365, the company can still come out ahead in the end. But for now, Windows 8.1's progress has lived up to neither the company's goals nor many users' expectations.

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