Microsoft has flopped on smartphones and tablets. At the same time, its Windows 8.x has continued to be such an abject failure, with a mere 13.4% share of the PC market, that it's trailing even legendary fiasco Vista in market acceptance.
So what's Microsoft to do?
Why, go back to its old playbook and kill profits entirely in the hope of regaining market share. Back in 2009 when Linux-powered netbooks were cutting into Windows' market share, Microsoft brought back XP Home and almost gave it away. Simultaneously, Microsoft pushed Windows 7 out the door as fast as possible to replace Vista.
It worked. And users have yet to lose their fondness for Windows XP. In August 2014, XP was still running on 23.9% of all PCs, while Windows 7 was hanging in at 49.9%.
Will it work again? We'll see.
Here's what Microsoft is planning.
First, it has made Windows 8.1 With Bing royalty-free for OEMs. This bottom-end version of Windows 8.1 is being sold on systems with prices ranging from $199 to $249.
The object of this is to persuade bargain-hunting users to come back from Chromebooks. While Microsoft and its apologists have consistently denied that they were worried about Chromebooks, evidence like this suggests otherwise. It's true that Net Applications has never shown Chromebooks as having a significant market share, but then again, Net Applications is a Microsoft partner. Other analysts, such as Gartner, expect Chromebooks to triple in sales over the next three years. And Google is making the Chromebook much more of a threat to Windows by finally bringing Android apps to the devices.
Second, just as in 2009, Microsoft isn't just relying on cheap machines to save its bottom line. It's rushing Windows 9, a.k.a. Threshold, into the market as fast as it can. The company is also doing its best to create hype around Threshold by leaking screenshots that promise a return to the WIMP-style interface (as in windows, icon, menu and pointer) that Windows users crave.
It's a tried and true formula that gives Microsoft an excellent chance of retaining the desktop despite all of its Windows 8 blunders. Nonetheless, its dominance will recede a bit. I expect Chromebooks to eventually make at least as big a dent in the PC market as Macs have. Gartner thinks so too, predicting that Chromebooks will move from 2% of all PCs sold today to 5% by 2017.
So everything is going to be fine and dandy for Microsoft, right?
Owning the traditional PC market doesn't count for as much as it used to. IDC and Gartner both see the PC market continuing to shrink, albeit not as quickly as they'd previously expected. And ironically, if it hadn't been for Chromebooks and Macs, the PC market would have shrunk even more.
So, yes, Microsoft will be king of the PC mountain, but that mountain is looking more and more like a hill. Where the real end-user growth remains is in tablets and smartphones. And, there, Microsoft trails far, far behind Google's Android and Apple's iOS.
In the end, Microsoft's desktop victories will not be enough to win the end-user war.
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