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Microsoft's counter-attack against Windows 8 coverage makes it 'look weak'

Gregg Keizer | May 14, 2013
Apple-esque communication strategy comes home to roost, argues analyst

"They have good growth in different divisions, and their gross margins and profit margins remain among the highest in the business," Moorhead said. "But Windows is behind the ball."

For the first quarter of 2013, Microsoft's gross margin -- sales minus cost of goods divided by revenue -- was 76.6% and its profit margin, or percentage of revenue remaining after fixed and variable costs, was 29.6%. By comparison, Apple's gross margin for the same quarter was 37.5% and its profit margin was 21.8%.

"With Windows 8, Microsoft is trying to shoot ahead of the curve," Moorhead acknowledged. "Metro is the best UI for large panes of glass, like wall panels and TVs. It's the best for voice and air-touch. But for other uses, it's a UI that looks ahead to 2015 or 2016. And for now, users are reacting to it negatively."

And that negative reaction isn't imaginary: Windows 8 has not sparked a resurgence in PC sales, as many, including Microsoft and its OEM partners, hoped. It has, however, given Windows-based tablets some traction, with estimates of shipments in the first quarter ranging from 3.7% to 7% of the market.

Windows Blue is meant to give the operating system another shot at driving PC sales for the back-to-school and holiday sales seasons, and increasing Microsoft's share of the tablet market with a shift towards smaller, less-expensive tablets.

Which made Shaw's dispatch all the more confusing to Moorhead.

"They're on the defensive here," said Moorhead. "I don't think there is anyone who read that memo that thought any differently. You only write a response like this when your back is against the wall to a certain extent.

"I don't think this had to be written," Moorhead said.


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