According to a
recent IDC report about tablets, there's good news and bad news for Microsoft.
The good news is that Windows tablet sales will surge in the next four years.
The bad news is that even then, they'll be only 10% of the market. In the
report, IDC increases the number of tablets it expects to be sold in 2012,
122.3 million of them, compared to a 117.1 million estimate previously. By
2016, it expects a whopping 282.7 million tablets to be sold.
Apple tablets
will rule the roost for years to come, according to IDC. In 2012, it will have
53.8% of the market, and by 2016 it will have 49.7% of the market. Android,
meanwhile, will have 42.7% market share this year, and 39.7% in 2016.
Windows
tablets will grow from a 2.9% market share in 2016 to a 10.3% market share in
2016. In terms of actual shipments, Windows tablets will see a 69.2% compound
annual growth rate (CAGR), while Apple will see a 20.9% CAGR and Android a 21%
CAGR.
While that
69.2% CAGR looks good, keep in mind that Microsoft is starting out at the
bottom of the market, so it's easy to rack up high numbers. Far more impressive
is the Apple 20.9% and the Android 21%, because they're already shipping plenty
of devices.
Microsoft
can't be pleased with these numbers. A mere 10.3% market share by 2016 is very
bad news. If true, would show that the Windows 8 experiment of designing a
tablet operating system for PCs as a way to get people used to the tablet
interface so they buy tablets, has failed. But that is only an IDC projection!
There's also
some more evidence that Microsoft's Surface RT tablet sales have been sluggish.
The Boston-based brokerage firm Detwiler Fenton says that Microsoft is expected
to sell only 500,000 to 600,000 of them in the December quarter, compared to
Microsoft's expectations of one million to two million. So reports AllThingsD.
AlThingsD says that one reason is poor distribution. Detwiler Fenton said,
according to AllThingsD:
"Lack of
distribution is killing the product. Mixed reviews and a high starting price
tag certainly don't help, but lack of retail exposure at Best Buy and others is
severely depressing sales." In Africa for instance, Microsoft Surface is
yet to be officially launched.
None of this
is good news for Microsoft in a world in which tablets and mobile are where the
growth is, not personal computers. So far, at least, it looks like Windows 8
might not do anything to help Microsoft in mobile.
Again, of more
than a dozen tablets Microsoft and Intel touted for the new version of Windows,
only five can be purchased for immediate US delivery. Early demand for
Microsoft's first computer, the Surface tablet, seems
"disappointing", said Craig Berger, an analyst at FBR Capital
Markets. And computer-makers have been hampered in introducing tablets by
limits Microsoft imposed on which manufacturers got a crack at prototypes, and
by delays in Intel power-management software.
The hold-up is
making it harder for personal computer makers, already beleaguered by
plummeting demand, to challenge Apple and Google during the year-end holiday
shopping season. While PC variants running Windows abound, tablets built on ARM
technology-based chips or low-power processors from Intel are scarce.
To compound
this, the list of Windows tablets is short. In addition to Microsoft's Surface,
Asus's Vivo Tab RT and Lenovo's IdeaPad Yoga run the RT version of Windows and
boast ARM-based chips. Samsung's ATIV Smart PC and Acer's Iconia run Windows 8,
and rely on Intel chips.
Two of them,
the Surface and the Acer device, are only available at Microsoft's stores,
which number just more than 60 for the holidays. FBR's Berger wrote in a note
last week that Surface sales "have underwhelmed expectations".
Microsoft has declined to comment on Surface sales, which isn't a positive
sign, said Wes Miller, an analyst at Directions on Microsoft.
"When
Microsoft is stealthy about numbers, that usually means something," he
said.
At a September
event, Intel said nine PC-makers, including Dell and Hewlett-Packard, would
have devices with its newest low-power chip on sale when Windows was released
in October. More than a month later, only four manufacturers do.
Days before
Windows went on sale, Microsoft provided a list of five Windows RT devices it
said would be available at the software's release. Only two made it out of the
gate, and Microsoft later said the list contained errors. In a note to clients,
Rick Sherlund, an analyst at Nomura, termed Windows 8's release an
"awkward launch, with PC vendors slow to bring out" new tablets and
Ultrabook touch devices.
For the PC
industry, Windows 8 and RT tablets and touch- screen laptops that convert to
handhelds are an attempt to build a beachhead in the mobile business. The PC
market is forecast to shrink this year for the first time in more than a
decade. Tablet shipments will pass notebooks in the second half of 2013,
estimates Eve Jung, an analyst at Nomura. NPD DisplaySearch projects the tablet
market will reach $162 billion in 2017, more than double its size this year.
Intel and
Microsoft shares have suffered as concern rises about the future of the PC
industry, exacerbated by the lack of Windows tablets on the market. The PC
market's lack of momentum contrasts with the 43 per cent jump in tablet
shipments in the third quarter, according to Strategy Analytics. Apple, before
it introduced a new line-up of iPads, including the lower-cost iPad Mini, had
57 per cent of the market in the period. Devices based on Google's Android
mobile operating system had 41 per cent, and Microsoft Windows-based tablets
had 1.6 per cent of the global market.
"Windows
doesn't typically come screaming out of the gate, but it's fair to say that
Intel and Microsoft would have hoped for more," said Alex Gauna, a San
Francisco-based analyst at JMP Securities. Microsoft chief executive Steve
Ballmer said at a shareholder meeting in Bellevue, Washington, last week that
Microsoft is seeing "fantastic demand" for tablets and touch-screen
PCs featuring Windows 8, and is working to get more into stores.
Microsoft
declined to comment for this story except to refer to comments from Windows
chief financial officer Tami Reller at a conference last week. "There are
some touch devices in retail today and we're working to get more touch devices
out there," Reller said. "But broadly speaking there's a lot of great
devices that have come to market, some that have sold out, some that are now
being replenished and coming to market, and more models to come."
Typical
Windows releases are accompanied by hundreds of new machines. In this case,
hardware manufacturers have done a better job delivering PC and notebook
designs than tablets. While there are few tablets available, Microsoft has
certified a total of 1500 machines to run Windows 8.
Microsoft’s
Windows RT Surface tablet has proved a dud in the market so far. From being
praised to be the first tablet to run on Microsoft’s latest Windows RT OS, the
tablet is being written off as another unsuccessful venture by Microsoft. But
there are analysts who have said that the tablet is failing not because of the
dissatisfaction of people with hardware or its OS, but because of the fact that
it is not available in much of the world. Only Microsoft is selling the tabs
either online or through a handful showrooms it owns.
But to be
true, Microsoft from the very beginning didn’t have great hopes from this
tablet. They were expecting at least a few million tabs being sold in the
market. Unfortunately given the low demand for Surface RT tablet, Microsoft was
forced to cut the orders by as much as half to its OEM partners in Asia.
Reports suggest that the company may not be able to cross 1 million surface
tablet sales mark in the current quarter. That and the fact that the existing
price tag is just unreasonable. Analysts have attributed weak sales of
Microsoft’s Surface to its hefty price tag, and the Surface Pro does little to
alleviate this burden on users’ pockets.
Microsoft
revealed the pricing information for its fully stocked Windows 8 Surface Pro
tablet at the end of November, and the device will cost $899 for the 64GB model
and $999 for the 128GB edition. While Microsoft’s forthcoming gadget boasts a
fuller operating system and more storage, users can purchase a loaded Windows 8
PC for less than this $899 price point. Many mid-range Windows 8 hybrid
laptops, such as Sony’s VAIO 13.3-inch ultrabook, fall in the $600-$800
bracket.
The device
will compete with the likes of Apple’s iPad, Google’s Nexus 10 and other
various 10-inch tablets come 2013, although its price and features appear to be
aimed at laptop buyers rather than slate shoppers. The Surface Pro’s primary
issue lies in the fact that it’s too expensive to really make a splash in the
market as a tablet, but it’s not impressive enough as a laptop to gain traction
with PC buyers.
As some
acknowledge, the Surface Pro seems like an appealing laptop/tablet hybrid for
businesses, but Microsoft will have to gain a lot of market share to rival
Apple in that area.
“Love it or
hate it, the iPad started the Bring Your Own Device (BYOD) movement in IT,”
Steven J. Vaughan-Nichols writes. “Steve Jobs may not have had office workers
in mind when he dreamed up the iPad, but the iPad has become the poster child
for tablets in business.”
Microsoft is in the early stages of creating what could
be a successful Surface brand, but it has yet to learn from its mistakes. There
have been talks of a Surface smartphone in the works or a gaming-based tablet
referred to as the Xbox Surface, and perhaps Microsoft will work out its kinks
and find a strategy that works by then.