Microsoft had precious little choice when it came to importing Windows onto tablets, according to a new analyst report. Softening PC sales-which translated into declining Windows revenue-meant the company needed to look at ways to extend its business model onto new, more mobile devices.
For its second quarter fiscal 2012, Microsoft saw its Windows and Windows Live division revenue dip some 6 percent from the prior period, to $4.74 billion. Company executives on a Jan. 19 earnings call highlighted recent flooding in Thailand, which curbed the global supply of hard drives, as a reason behind the recent decline in PC sales and attendant drop in Windows revenue.
According to at least one analyst, however, the dip in PC sales is a much longer-term proposition. "Flooding in Thailand only has short-term implications on the overall condition of Microsoft's Windows division," Matthew Casey, an analyst with Technology Business Research, wrote in a Jan. 19 note. "The long-term concern for Microsoft through 2012 will be how to transition its PC-dependent Windows business to a sustainable business model beyond the single device." In other words, smartphones and tablets (along with super-portable laptops like ultrabooks) are increasingly important to Microsoft's long-term growth.
The Windows 8 beta will arrive in February, with a final release reportedly scheduled for the second half of 2012. It remains to be seen when the first Windows 8 tablets will hit store shelves.
While the Windows franchise reorients itself, he sees another Microsoft vertical taking more of a role in driving the company's revenue. "At the same time Microsoft's Windows and Office divisions face the challenges of continuing to grow as mature franchises, the Server & Tools division is solidifying its position as the next foundational franchise," Casey wrote. "The company is taking advantage of growing cloud and virtualization adoption."
But that doesn't lessen Microsoft's need for Windows 8 to prove a sizable hit, even as the operating system arrives at a time when Windows 7, released three years ago, is still enjoying robust sales. Windows 8 on tablets will also find itself in a Sergio Leone-style stare-down with Apple's iPad, which currently dominates that vertical.
According to a rather voluminous document ("Windows Hardware Certification Requirements") posted on a Microsoft Website, Windows 8 tablets will require at least 10GB of free space, WLAN and Bluetooth 4.0 + LTE for networking, minimum 1366-by-768 screen resolution, at least one USB 2.0 controller and exposed port, a 720p camera, and a combination of gyroscope, three-axis accelerometer, and magnetometer.
Whereas previous versions of Windows offered a traditional "desktop" interface, complete with folders and start button, Windows 8 is further optimized for tablets with a start screen composed of big, colorful, touchable tiles linked to applications. A big part of Microsoft's future depends on whether that interface, paired with that hardware, plays to consumers' and businesses' wants and needs.