Of more than a dozen tablets Microsoft and Intel touted for the new version of Windows, only five can be purchased for immediate U.S. delivery. Early demand for Microsoft?s first computer, the Surface tablet, seems ?disappointing,? said Craig Berger, an analyst at FBR Capital Markets. And computer makers have been hampered in introducing tablets by limits Microsoft imposed on which manufacturers got a crack at prototypes, and by delays in Intel power-management software.
The holdup is making it harder for personal-computer makers, already beleaguered by plummeting demand, to challenge Apple and Google Inc. during the year-end holiday shopping season. While PC variants running Windows abound, tablets built on ARM Holdings Plc technology-based chips or low-power processors from Intel are scarce.
?You can hardly even find one,? said Bob O?Donnell, an analyst at market researcher IDC in Framingham, Massachusetts. ?So even if you wanted to buy it, it would be difficult.?
The list of Windows tablets is short. In addition to Microsoft?s Surface, Asustek Computer Inc.?s Vivo Tab RT and Lenovo Group Ltd.?s IdeaPad Yoga run the RT version of Windows and boast ARM-based chips. Samsung Electronics Co.?s ATIV Smart PC and Acer Inc.?s Iconia run Windows 8, and rely on Intel chips.
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Microsoft Stores
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Two of them, the Surface and the Acer device, are only available at Microsoft?s own stores, which number just more than 60 for the holidays. FBR?s Berger wrote in a note last week that Surface sales ?have underwhelmed expectations.? Microsoft has declined to comment on Surface sales, which isn?t a positive sign, said Wes Miller, an analyst at Directions on Microsoft.
?When Microsoft is stealthy about numbers, that usually means something,? he said.
At a September event, Intel said nine PC makers, including Dell Inc. and Hewlett-Packard Co., would have devices with its newest low-power chip on sale when Windows was released in October. More than a month later, only four manufacturers do. Of those, only two have products in the U.S., Intel said.
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?Awkward Launch?
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Days before Windows went on sale, Microsoft provided a list of five Windows RT devices it said would be available at the software?s release. Only two made it out of the gate, and Microsoft later said the list contained errors.
In a note to clients, Rick Sherlund, an analyst at Nomura Holdings Inc., termed Windows 8?s release an ?awkward launch, with PC vendors slow to bring out? new tablets and Ultrabook touch devices.
For the PC industry, Windows 8 and RT tablets and touch- screen laptops that convert to handhelds are an attempt to build a beachhead in the mobile business. The PC market is forecast to shrink this year for the first time in more than a decade. Tablet shipments will pass notebooks in the second half of 2013, estimates Eve Jung, an analyst at Nomura. NPD DisplaySearch projects the tablet market will reach $162 billion in 2017, more than double its size this year.
Intel and Microsoft shares have suffered as concern rises about the future of the PC industry, exacerbated by the lack of Windows tablets on the market. Intel trades at a 42 percent discount to the Standard & Poor?s 500 Index on a price-to- earnings basis, according to data compiled by Bloomberg. Microsoft trades at a 29 percent discount on the same basis. Chipmaker Qualcomm Inc., benefiting from the surge in sales of mobile devices, trades at a 24 percent premium.
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Market Contrast
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The PC market?s lack of momentum contrasts with the 43 percent jump in tablet shipments in the third quarter, according to Strategy Analytics. Apple, before it introduced a new lineup of iPads, including the lower-cost iPad Mini, had 57 percent of the market in the period. Devices based on Google?s Android mobile operating system had 41 percent, and Microsoft Windows- based tablets had 1.6 percent of the global market.
?Windows doesn?t typically come screaming out of the gate, but it?s fair to say that Intel and Microsoft would have hoped for more,? said Alex Gauna, a San Francisco-based analyst at JMP Securities LLC.
Microsoft Chief Executive Officer Steve Ballmer said at a shareholder meeting in Bellevue, Washington, last week that Microsoft is seeing ?fantastic demand? for tablets and touch- screen PCs featuring Windows 8 and is working to get more into stores.
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?Great Devices?
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Microsoft declined to comment for this story except to refer to comments from Windows Chief Financial Officer Tami Reller at a conference last week.
?There are some touch devices in retail today and we?re working to get more touch devices out there,? Reller said. ?But broadly speaking there?s a lot of great devices that have come to market, some that have sold out, some that are now being replenished and coming to market, and more models to come.?
Reller said last week that Microsoft has sold more than 40 million licenses for Windows 8. Licenses include copies corporations get as part of a multiyear contract, as well as those sold on new PCs and in retail, so the metric isn?t a clear indication of demand.
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More Choices
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Intel, meantime, said consumers have more choices now, with tablets, ultrabooks and convertible devices that offer features of both.
?We have a number of innovative designs across the spectrum that offer a full Windows 8 experience, including new Intel-based tablets selling now from Samsung, Acer, Fujitsu and LG with several more on the way,? Bill Calder, an Intel spokesman, said in an e-mailed statement.
Typical Windows releases are accompanied by hundreds of new machines. In this case, hardware manufacturers have done a better job delivering PC and notebook designs than tablets. While there are few tablets available, Microsoft has certified a total of 1,500 machines to run Windows 8.
U.S. retail sales of Windows PCs, including tablets, dropped 21 percent since the release of Windows 8 compared with the same period a year earlier, according to a report last week from market-research firm NPD Group Inc., whose data is based on a sampling of retailers and doesn?t include Microsoft?s own stores and therefore Surface sales. The decline has largely been fueled by a 24 percent drop in sales of notebooks as many customers opt for tablets, making it even more critical that Microsoft offer an ample selection and supply of those devices.
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Early Signs
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Already before the release of Windows, there were signs tablet selection would be sparse. For Windows RT, Microsoft limited the number of computer makers that could manufacture devices, setting up a program where each of the three chipmakers working with Windows RT would select two computer makers each to work with, for a total of six Windows RT devices, not including Microsoft?s own Surface.
Of those three chipmakers, only Nvidia Corp. and its computer-maker partners managed to get Windows RT tablets out for the release in October. Texas Instruments Inc. has no Windows RT tablets with its chips after Toshiba Corp. canceled its plans, citing component-supply issues. Hewlett-Packard opted not to make an RT device at all.
A Dell Windows RT machine that Microsoft initially said would be available in October is going on sale in December, though customers can order the machine now. A Samsung device also originally listed for October will be released ?in the coming weeks,? said Cho Sung In, a spokeswoman for Samsung.
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Intel Devices
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More Intel-based devices are also coming. ZTE Corp.?s tablet will go on sale in the first quarter, according to Jackie Jiang, a spokeswoman.
Just weeks before the release of Windows 8, a person familiar with the matter said Intel hadn?t completed the necessary power-management software for tablets with its Clover Trail chip, its latest low-power processor designed for tablets to rival the iPad in battery life.
The delay in the delivery of that program meant that Microsoft didn?t certify many Clover Trail machines in time to reach stores on Oct. 26, or in the weeks since then.
Customers can pre-order machines from Dell, HP, Lenovo and Asustek with Clover Trail chips, Intel said.
--With assistance from Edmond Lococo in Beijing. Editors: Reed Stevenson, Jillian Ward
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To contact the reporters on this story: Ian King in San Francisco at ianking@bloomberg.net; Dina Bass in Seattle at dbass2@bloomberg.net
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To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net
Source: http://www.businessinsider.com/microsoft-tablet-sales-2012-12
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