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Microsoft Windows 8 Surfaces as Challenge to Apple Mobile

October 24, 2012

Microsoft Windows 8 Surfaces as Challenge to Apple Mobile

The Windows 8 operating system produced by Microsoft Corp. Source: Microsoft Corp.

Microsoft Corp. (MSFT:US) Chief Executive Officer Steve Ballmer says Windows 8, the next version of his company’s operating system, will be bigger than Windows 95, an early and much heralded upgrade unveiled almost two decades ago.

It had better be.

Bill Gates, then CEO of the largest software maker, introduced Windows 95 when the World Wide Web was still coming of age. While the program met with robust demand, it failed to catapult Microsoft to the forefront of the Internet industry.

On the eve of Windows 8’s release, Microsoft is facing the risk of being left behind again by another technological wave -- the rise of mobile computing in the form of tablets and smartphones, led by Apple Inc. (AAPL:US)’s iPhone and iPad. To respond, the company has completely redesigned the software to include touch-screen capabilities. To showcase the new operating system, Microsoft has also broken with tradition by making its own tablet, becoming a competitor to longstanding hardware partners.

“It’s starting to look like the biggest thing that Microsoft has ever done is going to be getting past the next few weeks,” said Michael Gartenberg, an analyst at Gartner Inc. who has covered the company since the release of Windows 95. “They have to match what it took competitors 10 years to do -- oh, and they have to bring partners along with them.”

PC Slump

Windows 8, which will power desktops, laptops and handheld tablets, and the company’s new device, called Surface, will go on sale Oct. 26 following a kickoff event in New York tomorrow. Redmond, Washington-based Microsoft is relying on the software, a product conceived in 2009, to revive interest in the personal computer. The PC market will contract by 1.2 percent to 348.7 million units this year, according to IHS ISuppli. That would be the first annual decline since 2001.

Yet the software may not be able to outweigh consumers’ growing attraction to tablets and smartphones, which are getting faster and more powerful and doing more tasks people once needed PCs for. IDC, another researcher, is likely to cut its projection for fourth-quarter PC shipment growth, which had been estimated at 4.8 percent, analyst Loren Loverde said. Even that gain would have represented “limited” growth for a quarter in which a major new Windows program goes on sale, he said. It’s also slower than historical growth rates that averaged more than 10 percent a quarter from 2003 through 2010.

Casting a further shadow over the introduction, Intel Corp. (INTC:US) CEO Paul Otellini told staffers in Taiwan last month that Windows 8 is being released before it’s fully ready, a person who attended the event said. Otellini told employees that releasing the operating system on schedule was the right move, and said Microsoft can make improvements after it ships, the person said.

Mobile Moves

While it’s betting on a comeback in PC-market growth, Microsoft is also counting on Surface to make a mark in mobile computing. The product will thrust the company into a hardware market it has left to partners since Bill Gates and Paul Allen founded the company in 1975. In addition, Microsoft will unveil a new version of its Windows Phone software next week.

“The last three and a half years has been in some ways the most pivotal set of products that we have ever designed and launched,” said Jensen Harris, director of program management for Windows user experience. “We wanted to shake people loose, to be free to think about what would we do if we didn’t feel constrained by the past. Taking that leap forward meant taking a risk.”

Ballmer brought Steven Sinofsky, a veteran of Microsoft’s Office software, into the Windows business to stabilize the flagship product ahead of the much-delayed release of Windows Vista, which shipped more than two years late in 2007 and was met with little customer enthusiasm. In 2009, Windows 7 brought the business back on course in part by appealing to corporate customers.

Tablet Threat

Still, Windows 7 hasn’t kept consumers from shifting some computer purchases to tablets like Apple’s iPad. Windows revenue has missed analysts’ estimates in six of the past eight quarters. The company knew it needed to do something drastic to show Windows could go mobile.

“We started thinking about if we were to start Windows today, if we were starting fresh, what would it look like?” said Julie Larson-Green, the vice president who oversaw the design and delivery of Windows 8.

Larson-Green’s team got rid of Windows 95’s iconic multicolored Start button, even though some product testers complained. The new Windows’ home screen adopts the tile-like interface now used in Windows Phone, which can be personalized and automatically updates with weather or messages from friends and family.

In another departure for Microsoft, computers with chips based on ARM Holdings Plc (ARM)’s technology will be able to run a version of the new software called Windows RT.

‘Strong Opinions’

“Some people are going to see it and they’re going to have strong opinions that are going to be negative, and some people are going to love it in a way that they’ve never loved Windows before,” Harris said.

Still, Larson-Green said she’s never been concerned that the design and direction would be poorly received. By the time she and Sinofsky first unveiled it in June 2011, the team had done enough research to feel “confident but not cavalier,” she said.

One thing Microsoft has sought to replicate from Apple is the company’s famous attention to detail, Harris said. For Windows 8, that meant a lot of time spent perfecting things that previously might have been declared good enough.

Five Buttons

Swiping from the right edge of the screen brings up five buttons Microsoft calls charms. The Windows logo button exhibits a subtle animation that looks almost as if light is coming across it, Harris said. To get it right, a team of six or seven people spent an entire weekend holed up in an office in Microsoft’s building 84. Every hour, they looked at 30 to 40 different versions until it was perfect.

“That level of detail has not existed in this product in that way before,” he said.

The emphasis on tablets and on touch controls, which IDC estimates will only be available in 15 percent of notebook PCs next year, has some analysts concerned that the operating system is too consumer-focused.

“As far as enterprise is concerned, Windows 8 is Windows Vista version 2 -- it’s the version they skip,” said Bob O’Donnell, an analyst at IDC.

Business Customization

Larson-Green disagrees. She said the customizable nature of Windows 8’s start screen means businesses can tweak versions to show exactly what their employees require and to display the latest information in the automatically updating tiles.

With corporate use of the iPad rising, Apple is no longer just a consumer threat. Currently there’s no version of Microsoft’s Office productivity software for the iPad, which means the success of those devices with businesses also may imperil growth in Microsoft’s biggest division.

“Office and Windows are bosom buddies,” said Wes Miller, an analyst at Directions on Microsoft in Kirkland, Washington. “As Office goes, so goes Windows, and vice versa.”

If Microsoft’s strategy fails, it won’t be for lack of guts, said IDC’s O’Donnell.

“It’s incredibly bold, it’s incredibly hard to do,” he said. “I’m not convinced it’s all going to work out exactly as they hoped.”

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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