Microsoft to redesign Windows 8 as PC sales plummet

Six months after the release, Microsoft — which relies on Windows licences for half its profits — is getting ready to make compromises to key aspects When Microsoft boss Steve Ballmer first revealed his software for the touchscreen world in February 2012, he said he was "betting the company" on it.

There were “no compromises” made in replacing the desktop with Windows 8’s tile-based interface, Ballmer insisted.

But six months after the release, Microsoft — which relies on Windows licences for half its profits — is getting ready to make compromises to key aspects of the software. It comes after its leap into the tablet computing future was described as “confusing” by new users and has been blamed for plummeting sales of PCs, which had their sharpest drop on record in the first three months of this year, down 14%.

The biggest expectation is that the update to Windows 8, codenamed Blue will revive the start button.

Tami Reller, promoted to head Microsoft’s Windows division after Ballmer ejected former chief Steve Sinofsky, announced on an internal Microsoft blog on Monday that Blue will be “an opportunity for us to respond to the customer feedback” since the launch.

One of the bestselling apps on Windows 8 has been Stardock, which lets the user add the start button, and ModernMix, which lets tile apps run on the old desktop. That will have given Reller pause — with the fact that sales of Windows PCs have shrunk for the past four quarters, declining year—on—year by 11.4% between January—March to about 74m.

The blame for that was put squarely at Sinofsky’s door by Bob O’Donnell of the research company IDC: “The costs associated with touch have made PCs a less attractive alternative to dedicated tablets and other competitive devices, he said.” At Gartner, a rival research company, vice—president Michael Silver says Microsoft “didn’t listen to customers who were pointing [the start button problem] out in testing. They could have had a middle ground, but chose not to — I think Sinofsky made sure it was pretty difficult to make major changes if he didn’t want them.” Sinofsky and Ballmer are understood to have argued over such flexibility — which saw the junior leave quickly.

Meawhile the traditional PC business is merging with that of tablets and smartphones — in which Microsoft is barely visible. IDC said that while PC sales were plunging, tablet sales in the first quarter of 2013 hit 49.2m, overtaking desktop—based PCs. Smartphones passed that mark long ago, having outsold PCs since the end of 2010. But Microsoft’s Windows Phone has less than 5% share worldwide, compared with 70% for Google’s Android and 20% for Apple’s iPhone. Microsoft only has about 1% of the tablet market, according to IDC.

This week Microsoft co—founder and chairman Bill Gates defended Windows 8: “It takes the benefits of a tablet and the benefits of a PC, and it’s able to support both of those — so if you have [Microsoft own—brand tablet] Surface, Surface Pro, you’ve got that portability of a tablet but the richness of a PC in terms of the keyboard, Microsoft Office of a PC,” he said.

Reller was also able to announce that Microsoft has now sold 100m Windows 8 licences in the six months since it was launched, matching the previous figure for Windows 7 at the same time in 2010. Though she didn’t explain it, business customers are buying Windows 8 licences but actually install the older Windows 7 — with its familiar start button.