Windows 8: Microsoft (Nasdaq: MSFT) Strikes Back at Apple and Google

Microsoft Corp. (Nasdaq: MSFT) has radically retooled its flagship product, Windows 8, to fight for a bigger piece of a mobile computing market currently dominated by its rivals.

Microsoft unveiled a beta version of Windows 8 at the Mobile World Congress in Barcelona last week.

With a final release expected in the fall, Microsoft needs Windows 8 to be a winner.

Microsoft's Windows, which has owned desktop computing with a market share well over 90%, has not fared as well on mobile devices like smartphones and tablets.

Instead, Apple Inc. (Nasdaq: AAPL) and Google Inc. (Nasdaq: GOOG) have dominated the "post-PC era" with such products as the iPad and the Android operating system.

The Redmond, WA, tech giant now hopes that Windows 8, optimized for the touchscreens of mobile computing but sharing a unified look and feel between its tablet and desktop versions, will reverse its fortunes in mobile computing.

"Microsoft's future path is riding on Windows 8 and its success," Gartner Inc. (NYSE: IT) analyst David Cearley told the Associated Press. "This is a chance for Microsoft to re-establish itself in a market where it's becoming increasingly irrelevant."

Microsoft is at a critical juncture.

The Windows and Office franchises that the company was built on rely on continued growth in the PC market which has slowed in recent years.

This stagnation in the PC market has hurt Windows sales. Revenue from the Windows division was down 6% in the December quarter – the fourth time in the past five quarters that revenue from Windows has declined year-over-year.

Meanwhile, Apple has become the most valuable company in the world on the strength of its iPhone and iPad businesses.

Unless Windows 8 can establish a strong presence in mobile computing, Microsoft risks getting left on the sidelines of tech – still moderately successful, but with little chance for growth and waning influence.

Praise for Windows 8

Critics have praised Microsoft not just for its willingness to make major changes in adapting Windows to touchscreen computing, but for doing it well.

"It's a huge radical rethinking of Windows – and one that's beautiful, logical and simple," writes New York Times technology maven David Pogue. "In essence, it brings the attractive, useful concept of Start-screen tiles, currently available on Windows Phone 7 phones, to laptops, desktop PCs and tablets."

Microsoft also wisely adopted an interface paradigm – tiles – distinct from the app-oriented interface found on Apple's iOS devices and Google's Android. With Windows 8 arriving late to the mobile party, Microsoft needs to offer a different experience to boost its chances of getting consumer attention.

Microsoft also sets Windows 8 apart by making all versions look and behave the same on all devices, be they desktop computers, tablets, or phones. Apple's mobile iOS, for example, differs significantly from its Macintosh operating system, the idea being that each OS is tailored to the hardware it runs on.

Microsoft believes users want more continuity as they switch between devices.

"There are too many hard stops between tablets and devices and smartphones," Steve Sinofsky, president of the Windows division, said at the Windows 8 debut in Barcelona. "This makes them much more harmonious and seamless."

In one more significant move, Microsoft plans to release a version of Windows 8 that will run on chips made by ARM Holdings plc (Nasdaq ADR: ARMH), which power most non-Apple mobile devices, instead of just Intel Corp. (Nasdaq: INTC) chips.

That gives hardware makers more options, which should translate to more Windows 8 devices in the marketplace.

Making Up Lost Time at Microsoft (MSFT)

Of course, just because Windows 8 appears well thought-out doesn't mean it will get Microsoft back in the mobile computing game. The measure of success will be whether it can win customers away from the well-established market leaders, Apple and Google.

Microsoft faced a similar problem with its MP3 player, the Zune.

Although a worthy competitor to Apple's iPod, the Zune arrived several years late and never threatened the iPod's dominance.

In mobile computing, Microsoft faces not one but two powerful competitors in Apple and Google, as well as their respective ecosystems of apps and cloud services.

Microsoft's traditional Windows ecosystem is vast, but on the mobile side it lags behind that of its rivals. For example, the Windows Phone Marketplace recently passed the 70,000-app milestone, compared to 450,000 Android apps and 550,000 Apple iOS apps.

However, Microsoft does have a long history of working with numerous hardware partners in its favor. Microsoft's deal last year with Nokia Corp. (NYSE ADR: NOK) will ensure Windows 8 will get a good push in the smartphone market.

And veteran PC partners such as Hewlett-Packard Co. (Nasdaq: HPQ) hope to have Windows 8 tablets ready for this year's holiday shopping season.

Assuming Microsoft backs the whole thing with its usual massive ad campaign, it will have done everything it can to make Windows matter in the mobile computing universe.

At that point, fingers will be crossed in Redmond.

"Microsoft is late to the game and this is a different game than they have been playing," Gartner's Cearley told the Associated Press. "But if they hit a home run with Windows 8, it could still turn some things around."

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