At a quarterly all-hands type meeting, Microsoft boisterous and ebullient CEO Steve Ballmer was more sedate than usual. While he raved about the upcoming next generation Surface tablet -- which was garnering rave reviews internally -- he also reportedly owned up to an unpleasant fact that Windows 8 isn't selling well.
The news -- which was pretty much a known fact to analysts and tech enthusiasts already -- came shortly after Microsoft's major leadership shakeup, in which it put the people in charge of Windows 8 (Julie Larson-Green, Tami Reller) in charge of key leadership positions over the entire company.
Revenue for the Windows unit dropped 55 percent (-$1.3B USD) in the second calendar quarter of the year (Microsoft's fiscal Q4 2013). After beating street expectations the previous quarter, Microsoft saw its efforts unravel badly with sales of both Windows and the embattled first generation Surface sinking to Vista-like levels of market apathy.
Microsoft and Mr. Ballmer came under fire from some of their major partners. Samsung blamed Microsoft for drooping PC (and by proxy semiconductor component) sales. Jun Dong-soo, head of the memory chip unit who sells DRAM and NAND to PC makers, called Windows 8 "less competitive" and complained, "[It is] no better than the previous Windows Vista platform."
Those are pretty harsh words coming from a major partner.
At the meeting Mr. Ballmer tried to convince employees that the free Windows 8.1 update would make up for the flop of its predecessor. He pointed to the return of a "Start Button" (although it's not the Start Button you used to know) and the use of telemetry data to improve weak spots in Windows 8 as critical keys to the turnaround. He also discussed increasing spending on professional services (consulting), although the leaks from the meeting made it unclear whether Microsoft is looking to recruit outside consultation for itself or make money off providing it to others.
In the second calendar quarter Google Inc. (GOOG) ChromeBooks gained major ground on Windows PCs, establishing a beachhead of approximately 4-5 percent of total personal computer sales, and a quarter of <$300 USD personal computer sales. Some OEMs such as Samsung and Acer, Inc. (TPE:2357) (another prominent critics of Windows 8) have turned to Chromebook offerings, and may be eyeing dumping Microsoft entirely, shoudl consumers continue embracing Google's offerings and rejecting Microsoft's.
Microsoft can take some solace in that Apple saw sales of its Mac computers miss expectations, leaving Google the only clear winner in the PC market for the quarter.