Can Windows still be top dog in the post-PC era?
14th Feb 2013 | 13:00
Windows 8, iPads and the Chromebook crunch
Those aren't the numbers you're looking for. These are: $429/£273.
That's the average selling price (ASP) of a Windows laptop in the last quarter of 2012, according to the NPD Group. Windows is selling, but it's largely selling on crappy hardware.
Despite Microsoft's desire to sell Windows on touchscreen devices, which have a much higher selling price, the ASP only increased by $2. That's largely because only 4.5% of sales were touchscreen PCs.
Windows 8 review
Meanwhile Apple's notebook ASP went up by $100, and it currently sits at $1,419 (around £897).
We all know how this works: Apple gets the luxury market and Windows gets the rest. Unfortunately for Microsoft, the luxury market isn't the only place where Windows is under attack. Remember Steve Jobs' predictions about a post-PC era? We're in it.
Caught in the crossfire
Windows faces several simultaneous threats. The first is that the PC market is in terminal decline. Notebook sales are down 11% year on year, and as NPD told Business Insider, "Windows notebook sales were going down all year. This isn't new. This isn't an acceleration. This is in line with what's going on. It's not any worse, or any better."
The second threat is the tablet. iPads and their Android and other OS-run cousins are selling in serious numbers now, and while every quarter shows another decline in PC shipments, tablet sales continue to rocket.
Apple did 22.86 million iPads in the last quarter, nearly 50% up on the previous year, and Samsung did just under 8 million. That's still short of Windows 8's average sales of 19.4 million copies per month, but it's clear that the gap is closing.
And that's before you include smartphone sales, which are expected to hit 1 billion annually by 2016. ASamsung Galaxy S3 might not look like a PC, but it's being used for many of the everyday tasks you used to use your PC for.
The third threat is the Chromebook. Sure, $429/£273 for a PC doesn't sound like much, but it's positively extravagant compared to the cost of a Chromebook. Acer's Chromebook has a full price of just $199.99/£199.99, and even HP's 14-incher is just $329.99 (around £209).
Samsung's $249/£229 Series 3 Chromebook was a Christmas holiday hit, and Lenovo is coming to the Chromebook party too. A Chromebook may not be an adequate substitute for a Surface Pro, but how many of us really need something that powerful - or that expensive? Institutional customers certainly don't: that's why Lenovo is targeting high volume customers with its ThinkPad X131e Chromebook.
Taken together, that means Windows is being attacked on three fronts. Apple's annexed the high end market, where the big profit margins are. Chromebooks are coming for the low end market and the high volume customers. And mobile devices are coming for everything else.
Where does that leave Windows?
Netbooks. A terrible mistake?
It's beginning to look like the netbook was a terrible mistake. Intel wanted to sell lots of processors, OEMs wanted to sell lots of computers, and Microsoft panicked that the netbook was a Trojan Horse that would finally deliver The Year of Desktop Linux. The result? An avalanche of really crappy Windows PCs.
As Paul Thurrott of Windows IT Proreports, "In a privately distributed report, NPD concludes that 'netbooks did an incalculable amount of damage to the PC market,' driving average selling prices down at an unsustainable rate."
That's why Microsoft is so keen on touchscreen. While it seems many of us won't pay much for a Windows PC, we will pay more for a tablet: the average selling price of a tablet is around $650 (around £410). The question is, will we pay that for a Windows tablet? Thurrott says: "Years of relying on cheap netbook sales to bolster the shaky PC market have coloured our perception of both Windows and the hardware on which it runs."
Windows has an image problem, and the Surface RT isn't helping. It's a lovely device let down by its operating system, relative lack of apps and premium price tag, and it simply isn't doing the numbers Microsoft hoped. Microsoft won't even admit how many Surfaces it has sold.
The Windows RT platform isn't looking too clever right now. The Surface retail strategy - basically, don't sell it anywhere people go - was disastrous.
iSuppli says that Microsoft is only selling 55% to 60% of the machines it's making and that the Surface RT suffers from "very high" return rates. Worried OEMs are shelving or shredding their Windows RT plans, there's still a significant app gap, and without significant production volumes, nobody's achieving the economies of scale necessary to drive down manufacturing costs.
The Surface Pro is more attractive, but it's pricey - it'll be Ultrabook money, not tablet money - and it's a 1.0 product. Reviewers agree that it's nicely made, but they are throwing the word "compromised" around with wild abandon: it's not as handy as a tablet or as powerful as other Windows PCs, but it's more expensive and significantly heavier than both.
Microsoft believes that the answer to Windows' woes is touch. According to The Register, just 2% of PCs sold through the distribution channel in November and December were touch-enabled. Given that Windows 8's UI was born to be touched and doesn't make much sense without touch input, that's a terribly low number.
Microsoft blames the lack of touch-enabled devices for Windows' disappointing Christmas, and it's effectively relaunching Windows 8 this month with new marketing, close partnerships with retailers and a new focus on getting people looking at, and touching, Windows 8 PCs.
Can Windows win?
Microsoft can't reverse the long-term shift from desktop to mobile computing, but it can address some of Windows' weaknesses. It could admit that launching the Surface RT first was a mistake and hide Windows RT in a cupboard until there are enough Modern apps to make it attractive.
It can make more bloatware-free, desirable PCs such as the Surface Pro, and encourage OEMs to do the same. It can sort out its retail strategy and its marketing. And more than anything else, it can focus on pushing the price down.
The triumph of Windows' enemies isn't guaranteed. There's more to business IT than somebody saying "ooh! Chromebooks are a bit cheaper! Let's switch!". Not everyone likes Apple's prices, policies or operating systems. Tablets are still better as lean-back devices than sit-forward ones.
But one of Windows' biggest problems remains its price. Clover Trail tablets, with ARM-style battery life and legacy apps support, could give other tablets a spanking - but right now they're more expensive than their Android rivals, and more expensive than better-specced notebooks. One Surface Pro costs the same as two iPads. And so on.
Microsoft knows this, of course, and that might explain its $2 billion interest in Dell, which might deliver all the benefits of having a manufacturing operation without having to have its own manufacturing operation.
But that's not all Microsoft is doing. It also has Windows Blue, expected this year, which will mean more frequent OS revisions and a much lower price tag. It might even address the things people don't like about the new Windows UI.
Cheaper, better Windows, closer working with selected OEMs, better marketing and a retail strategy that doesn't suck? It's a crazy idea that might just work.
Windows may have taken a beating, but that doesn't mean it's beaten.