As an analyst, studying companies and exploring future scenarios related to those companies is a weekly exercise. Although I haven’t quite come to solid conclusions related to how Microsoft gets from where they are today to where they need to be, I do have some ideas.
There is no question that Microsoft’s computing empire is in trouble. In 2008 Microsoft’s Windows OS ran on 95% of all computing devices. According to Forrester estimates, Microsoft Windows software now runs on about 30%.
By our projections, the Android install base will outnumber the install base of all Windows based devices combined by the end of this year.
There has been news of late that Microsoft’s next major update to Windows 8 is codenamed Blue. The biggest bit of speculation around this release is that it will do two things. First it will be less expensive, possibly offering an SKU as low as $45-$50 dollars. And second that it will support tablet screen sizes below 10” and most likely all the way down to 7-inches.
Smaller tablets? Microsoft is MIA
Microsoft has been glaringly absent from the tablet discussion in the white hot 7-8” form factor. My firm estimates that in 2013, sub 10-inch tablets will dominate tablet sales and represent more than 60% of total sales. Windows 8 today can only go as small as 10.1-inches. They are losing ground and offering their partners no solution for the hottest category of tablets.
If Microsoft were smart they would allow Windows Blue to help fill this gap. To do so Microsoft would need a new pricing strategy for screens in the 7″ and 8″ size range. It should be priced low enough so these new lower cost Microsoft tablets can be priced in the $199-$349.00 range. Most Windows 8 tablets today start at $499. If Microsoft does this, they could finally have a competitive product to Google, Samsung and Amazon.
But they would still not be competing for the ultra low end of the 7” tablet market that is now in the $89.00 to $129.00 price range. Recent reports suggest Microsoft will offer a $20 discount to OEMs for devices below 11.6 making these price points possible.
Return of the netbook?
If that is true and they do offer this lower price point on devices under 11.6-inches then it could also be used in some type of hybrid or clamshell offering for the lower end of the tablet and notebook market.
We are hearing from OEMs that there is interest in using Windows 8, and in this case it would be Blue, in an ultra-thin netbook-like device priced well under $399 that would be available this holiday season.
For that price I doubt it would have a touch-enabled screen in a clamshell-style device, but if it were a tablet with detachable keyboard it would have a touch screen as part of the design. A well designed clamshell with touch screen could possibly be in the $499-$549 range over time.
Big, full-featured tablets aren’t going away
While really cheap tablets will drive much of the tablet growth, there is still big demand for robust tablets with multiple cameras, more memory, faster processors, all priced in the $249-$349 range. At the moment Apple, Samsung, Google own this market, especially with tablets in the 7.9 “ to 8.1” range.
With Windows Blue it would give Microsoft a fighting chance in this low-end tablet space as early as this holiday season. If they do make it possible for OEMs to bring out a low-priced ultrathin clamshell using Windows Blue, it could be a solid product for the consumer market even if it is netbook-ish in nature.
The reason is that the Windows 8 app ecosystem is starting to finally grow, which would make a clamshell like this much more acceptable to the low end consumer market. And of course, it would be able to runs the tens of thousands Windows applications already on the market.
The low end of the market is not a place every OEM is positioned to succeed in, but it is unfortunately the road it looks like Microsoft needs to go down.
I suspect we’ll be hearing more about Windows Blue in the coming months. If Microsoft is smart with Blue, it could boost their partners volumes, help turn around their struggles in tablets, and inject some needed life back into their ecosystem.