Pondering Microsoft's (NASDAQ:MSFT) Windows 8 launch, I'm reminded of a scene in the movie Big. In this scene, Tom Hanks, a 10-year old in a grown-up body attends a toy maker's marketing meeting. The Ivy-league MBAs are showing off a set of robot toys that turn into buildings. "I don't get it" says Tom. A pompous MBA replies: "Well, if you had read your industry breakdown, you would see that our success in the action figure area has climbed from 27 percent to 45 percent in the last two years." "I still don't get it" replies Tom, "what's so fun about playing with a building? That's not any fun!"
Microsoft needed Tom Hanks when it designed Windows 8. Microsoft and its advocates have gushed about how Windows 8 will "seamlessly" unite desktop, tablet, and phone with a common look and feel. So no matter what device you turn on, you'll confront the same screen of inscrutable little tiles. The marketing people are really jazzed about this: "a unified experience across all platforms!!"
I don't get it.
I use my desktop PCs and my handheld devices for very different activities. I use the handheld devices to ponderously read email and web articles and play an occasional chess game. They need big, simple controls for my clumsy sausage fingers. I use the PCs to run multiple trading platforms and arbitrage programs on four 30-inch monitors, executing dozens of commands a minute with tiny mouse flicks. I couldn't do this stuff with a touch screen if I were Bruce Lee re-incarnated. Although it may send a tingle up the legs of marketers, giving my handheld and desktop devices the same interface makes no more sense than slapping the same dashboard on a Ferrari and a bicycle.
"But you can always switch Windows 8 back to the old interface on your PC" say the marketers. Right. So I should rush out to buy Windows 8 and risk all the bugs and security problems that come with a new Microsoft release, just so I can emulate the operating system that I already own?
"But using the same interface on all the devices lowers the learning curve." the marketers add. Let's see: it took my computer-illiterate parents approximately 5 minutes to learn how to use an IPhone. So, either the learning curve saving is miniscule, or Microsoft has some very serious usability problems with the Surface and Windows Phone.
The bottom line is that Microsoft has come up with something that insiders (particularly marketing people) think is really cool, but doesn't actually do anything that real users need or want. This is the backside of the "eat your own dogfood" culture that Microsoft has developed. Insiders project the desires of a small group of technically-oriented people in Redmond, equipped with the most advanced hardware and lots of time to sort out bugs, onto the rest of the world. You can do that if you have monopoly power. But Microsoft has entered an era where it no longer has that power.
Investors "don't get it" either
Since my previous SeekingAlpha articles on Microsoft, the market has punished the stock dramatically, with a 10% plunge. I'd love to take credit for this move, but know that I can't. I just think that other analysts and investors have come to the same realization that I did: Microsoft is losing out to slim devices on the front-end and Unix-based cloud providers on the back-end. This was confirmed by last quarter's earnings. Fewer PCs are being sold and more of the ones that are sold are going to server farms, where Unix is the operating system of choice. There is no indication Windows 8 will change this, since it doesn't really offer anything new that retail or enterprise customers need or want.
The biggest competition for Windows 8
In the earlier articles, I discussed how slim devices have supplanted Windows machines in many arenas. I neglected to discuss what may be the single biggest threat to Windows 8: Windows XP. I always make a point of examining the computer systems in businesses I visit. One observation stands out: Windows XP continues to be very widely used. Whether it's a hospital, an insurance company, or a bank, much of the work employees do is on simple web browser front-ends on XP machines. The web browser is, of course, talking to a cloud or corporate server application that's doing all the heavy-lifting. The application that processes my insurance claim, or my mortgage, and the one that brings up my x-rays -- it's all front-ended by a web browser. These employees barely need XP or an operating system at all; all they need is the modern equivalent of an old-fashioned WYSE terminal. How will companies benefit by shifting these employees to Windows 8? Ponder that. It will cost money to upgrade. And more money to train the employees on the new OS. Then there will be the inevitable bugs and the security problems that could endanger the entire enterprise. And in the end, the employees will be using the same web-browser interface they were using before. Does this sound like a compelling case for Windows 8? Maybe in 18 months when Microsoft stops supporting XP. But there may be better solutions by then.
Disclosure: I am short MSFT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.