Microsoft (NASDAQ:MSFT) made a radical change from Windows 7 to Windows 8 in its quest to become a devices company to emulate the successful business model of Apple. We will take a look as to how this could lead to a situation where Microsoft's loss could be Google's (NASDAQ:GOOG) gain as long-time partner Hewlett-Packard (NYSE:HPQ) changes its stance as it forays into mobile computing and now considers Microsoft as a competitor.
PC sales have been moving south quarter after quarter with third-quarter sales dipping by 8.6% as per research firm Gartner. This is the sixth consecutive quarter to witness continuously declining sales of PCs. It was this continuous decline in the sales of PCs that was badly hurting Microsoft as its ecosystem thrived on the idea of licensing software to hardware vendors.
With declining PC sales and the ever increasing influence of mobile computing, Microsoft had to make some desperate moves. Windows 8, the biggest redesign of the OS since 1995, was one of such moves.
More and more consumers are moving to smart devices like smartphones and tablets and this market space is largely held by Apple's iOS and Google's Android. Windows 8 had its own share of problems. Microsoft is still struggling to gain something substantial in the mobile computing market. As if this was not enough, there came a widespread hate for Windows 8 as it took away a key part of every Windows user's navigational tools: the Start Button.
This wasn't something that Microsoft was prepared for and expecting when it was trying to move to convergence - which has failed at least as of now. This was evident from the way Windows RT failed and Surface Pro also got a lukewarm response, which many believe to be the reason for the sudden departure of Steven Sinofsky. Microsoft was in state of denial and kept blaming the OEMs for poor sales of Windows 8. However, Microsoft still continued on its resolve to transform into a devices company and announced to acquire the devices and services division of Nokia after Windows Phone 8 seriously lacked the momentum to break into the duopoly of iOS and Android.
Microsoft is surely alienating partners by moving to an ecosystem where it will be competing with vendors who pay Microsoft licensing fees for the OS. As to how widespread this becomes is something that needs to be kept an eye on as Microsoft releases more and more of its own hardware, loaded with the OS & software that all other vendors like Lenovo, HP, Acer, Asus and Samsung also sell.
The widespread backlash to Windows 8, combined with Microsoft's decision to release its own, competing hardware, has alienated Hewlett-Packard for sure as HP now considers Microsoft more as a "competitor" than a "partner." It's important to note that HP held 17.1% of the PC market share in Q3 2013, only behind Lenovo.
Microsoft's loss is Google's gain?
HP probably is just the beginning and many would follow suit. Not that HP has stopped making Windows-based PCs, but at the same time it has embraced both Android and Chrome from Google's stable. As long as Windows has strong presence in the enterprise market, the PC isn't going to die.
But HP is transitioning to other options like using Android OS to launch the Slate series of tablets. In addition, using the Chrome OS, it also rolled out Hewlett-Packard Chromebook 11. In addition, it has also announced a forthcoming successor to its 14-inch Chromebook model. So the company is making more and more devices powered by the OS of one of the arch rivals of Microsoft - Google.
I say arch rival as Microsoft has an entire Scroogled campaign directed just against Google, which shows the animosity between the two tech giants. In my opinion, this just reflects upon the severe pressures that Microsoft is in on not being able to do anything meaningful in the market.
So indeed, Microsoft's loss is Google's gain. This could just be the beginning with something larger looming in background. So far, it's only HP that now considers Microsoft a "competitor" but others are also probably thinking the same. Last year, when Microsoft announced the Surface RT, Acer's CEO urged Microsoft to "think twice" about its decision.
Microsoft's biggest Windows 8 blunder may not have been the Metro interface with no Start button, Windows RT, or the Windows app store. It is the decision to create its own hardware -- a strategy it has committed itself to -- that may have irrevocably damaged its relationship with its OEM partners, and HP's stance could just be the tip of the iceberg.
Research firm Gartner predicts that by 2017, Google's Android will have effectively replaced Windows. With Microsoft's former partners switching sides, that prediction seems destined to come true and Microsoft seems to be running out of time.