Microsoft (MSFT) launched its new Windows 8 operating system on Oct. 26 with much fanfare. Many in the company believed it would be the product that would turn around the world's largest software maker's recent woes. Windows 8 offered touch-screen capabilities and was compatible on tablets, desktops and other mobile devices. But news last week that unit sales of Windows PCs in U.S. stores fell 21% between Oct. 21 and Nov. 17 caused tech experts to wonder if Microsoft could ever regain the stature that it once held in the computer world. According to NPD, sales of Windows PCs not only decreased compared to the same four-week period in 2011, but sales of Windows tablets were "almost nonexistent" — accounting for just 1% of Microsoft's PC business. NPD's analysis was conducted before the Black Friday shopping weekend, so an uptick in sales is likely. Yet Microsoft's push into markets now dominated by its competitors Apple (AAPL) and Google (GOOG) could prove to be a little too late. Even Apple's iPod business — a novel product that took consumers and the music industry by storm just six years ago — has overtaken Microsoft in profitability.
"Microsoft is in a really tough spot," says The Daily Ticker's Henry Blodget in the attached clip. "This was a very important product release for Microsoft. [The company] was very late on tablets, mobile — these are the growth engines of the world. Microsoft doesn't have the leverage that it used to have."
The world has greatly changed in the past decade, Blodget notes, and the rise of tablets and smartphones has forced the slow death of the traditional desktop computer. But to say Microsoft's collapse is imminent is "certainly a stretch," he adds. Microsoft's enterprise business has remained a strong point for the Redmond, Washington-based company and it still holds long-term contracts with major corporations.
The disappointing Windows 8 sales could lead to discussions about Microsoft CEO Steve Ballmer's future at the firm. Since taking the helm in 2000, the company has experienced one setback after another, and the stock, once a favorite among investors, has lost 9% since January 2000 (the stock is up 2.21% year-to-date). Microsoft, the former pioneer in web search and desktop computing, now finds itself as the underdog and slow to execute market-moving technology. Ballmer's devotion and knowledge of the company may be as intense as Bill Gates' and he's "still the best guy to run Microsoft," Blodget says. Whether investors and Wall Street have the patience to stick with Microsoft during this critical juncture remains to be seen.
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