FRAMINGHAM, Mass. — Reports earlier this week that Microsoft CEO Steve Ballmer predicted unprecedented sales of Windows 8 were wrong on multiple counts, Microsoft and independent analysts agreed.
But while Microsoft said Ballmer was misquoted or misunderstood, the analysts argued that even if the CEO’s number of 500 million had been accurate, it meant little about the upgrade’s success.
The kerfuffle started when the Agence France-Presse (AFP) wire service, reporting from a South Korean technology event, said Ballmer claimed up to 500 million users would “have” Windows 8 “next year.” A slew of blogs and news websites piled on, most of them questioning Ballmer’s number, or even his sanity.
It wasn’t hard to see why: Windows 7, which Microsoft has repeatedly said has been the fastest-selling operating system in its 37-year history, sold roughly 525 million licenses between its 2009 launch and the end of 2011. During the 12 months of last year, Microsoft claimed it sold some 225 Windows 7 licenses.
Since most interpreted the AFP’s “next year” as meaning through the end of 2013 — and because that would give Microsoft just 14-15 months for Windows 8 to make the half-billion milestone — a lot of people were skeptical.
Very skeptical.
All for naught, as it turned out: Late Tuesday Microsoft said the AFP piece was the result of crossed wires.
“The numbers Steve Ballmer gave at the Seoul event are a restatement of what we said at the Windows 8 Store event in December, when we were talking about existing Windows users and analyst projections of PC sales for 2012 that could be upgraded to Windows 8 when the time comes,” said a Microsoft spokeswoman in a email reply Tuesday night to a request for comment and clarification.
In effect, said Microsoft, AFP miscast a Ballmer line as a Windows 8 sales projection when in reality it was nothing of the kind.
The December 2011 event the company spokeswoman referred to was where Microsoft promised to ship the Windows 8 beta in two months and beat the marketing drum for Windows Store, the e-market that will be the only distribution source for Metro-style apps.
In a blog published that same day, Ted Dworkin, director of the Windows Store development team, said, “We’ve just passed the 500 million licenses sold mark for Windows 7, which represents half a billion PCs that could be upgraded to Windows 8 on the day it ships. That represents the single biggest platform opportunity available to developers.”
Dworkin linked the number of in-play Windows 7 licenses — each of which could potentially migrate to Windows 8 — to the prospects that Metro app developers faced. The more Windows 7 machines that could become Windows 8 systems, the happier everyone should be.
According to Todd Bishop of GeekWire , who obtained an excerpt of Ballmer’s speech this week, his remarks echoed Dworkin’s in the boasting of development opportunities.
“With something like 400 million to 500 million users expected in the next year, the best economic activity for people building machines, and the best economic opportunity for people writing applications will be around Windows,” Baller said, by Bishop’s version.
Ballmer said nothing about Windows 8.
But the focus on numbers in the follow-up media reports — did Ballmer really think Microsoft could double the sales tempo of Windows 7? — missed the point entirely, said a pair of research analysts with Directions on Microsoft, a Kirkland, Wash.-based firm that tracks only Microsoft.
“What will matter is how fast actual adoption of Windows 8 is, not how fast it sells on new devices, or what the run rate for PCs is,” said Michael Cherry of Directions in an email reply to questions. “If a new laptop is sold with Windows 8 and then downgraded to Windows 7, it has no value to a Metro-style application developer.”
Most enterprises have top-to-bottom “downgrade” rights, which let them replace a newer version of Windows with an older edition without paying for two copies. Companies typically exercise those rights because as they buy new PCs — with, say, Windows 8 pre-installed — they would rather run Windows 7 to standardize their desktop inventory.
Businesses and some consumers also downgrade a new machine because they haven’t completed compatibility testing on the new OS, or are just not ready to switch from the known to the unknown.
Cherry’s point — that PCs bought with Windows 8 but subsequently downgraded to Windows 7 skew the “have” numbers in the former’s favor — was picked up by Rob Helm, also of Directions.
“What partners want to know is, how many computers will be running Windows 8 at the end of 2013?” Helm asked. “The answer is: Fewer than 500 million, not counting pirates. How many fewer is what’s going to matter to the partners.”
Cherry and Helm distinguished between a Windows 8 license and a copy of Windows 8 actually being used, intimating that the latter could be much smaller than the former.
Ballmer and Dworkin, on the other hand, crowed about the number of PCs sold that could — emphasis on “could” — turn into Windows 8 PCs after an upgrade. They did that in an attempt to woo developers to Metro, Cherry said.
“One reason I think that Microsoft is being aggressive in citing numbers is to encourage developers to write Metro-style applications,” said Cherry. “You will see references to large numbers of Windows users, implying that the large number is the market for developers of Metro-style apps and the market for apps in the Windows Store.”
But that’s not accurate. “Metro-style apps will only run on Windows 8 devices, so it seems to me that the number of XP, Vista and Windows 7 users is irrelevant.”
Helm also criticized the numbers game Microsoft plays.
If the company counts licenses to come up with its projections, then by Microsoft’s rules there’s a host of PCs that the company can slip into the “Windows 8” column. The desktops, laptops, tablets and ultrabooks equipped with Windows 8 or even Windows RT, are just part of Microsoft’s total, said Helm.
“All existing PCs that have Software Assurance coverage on Windows 7 Professional as of the Windows 8 launch … [are entitled] to run Windows 8,” Helm said. “[And] all PCs that ship with rights to Windows 8 under a technology guarantee program, something that Microsoft has done with earlier versions of Windows, they’re counted as Windows 8 licenses too.”
Microsoft hasn’t announced an upgrade deal — what Helm called a “technology guarantee” — but will reportedly kick off the program the first week of June, when it starts offering a $15 upgrade to Windows 8 Pro for buyers of Windows 7 PCs.
“So if a technology guarantee program starts June 1, over half of the Windows PCs that ship in 2012 will ‘have’ Windows 8,” said Helm, showing how Microsoft can easily inflate the number. “But all that is irrelevant for device makers and app developers.”
Like Cherry, Helm was certain that what those partners were interested in was the number of Windows 8 users — thus customers — not an amorphous pool of licenses, many of which may not be running Windows 8 now or even in the foreseeable future.
In other words, Microsoft’s attempt to put Windows 8 in the best light — at least to developers — by touting a huge number of PCs able to run the OS is a smokescreen.
“Initially the market for Windows 8 Metro-style applications will be small, [although] it will grow over time,” said Cherry. “But it does not start on Day One as the entire base of Windows users.”
How fast that installed base converts to running the new OS will be critical, Cherry continued, but he declined to predict how fast that may occur. “There is little history to predict that adoption,” Cherry said.
Microsoft has not yet disclosed a ship date for Windows 8, or the availability of Windows 8- and Windows RT-powered devices, but the most experts expects an October launch, although some have staked out November instead.
