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Can Microsoft Survive If Windows 8 Fails?

By Paul Rubens, CIO
December 06, 2012 10:35 AM ET

CIO - Microsoft is betting the farm on the success of Windows 8--its new and radically different operating system.

That at least is the uncompromising view espoused by Steve Ballmer, the company's chief executive. "Our hardware partners are all in, companies like Verizon and AT&T are all in, there are hundreds of operators and retailers around the world who are all in, developers are all in, and--if anyone wasn't convinced yet --Microsoft is all in," he said at the San Francisco launch of the desktop version of the software in October.

BLOG POST: Microsoft may have some Windows Phone 8 momentum after all

But in financial terms, Microsoft may not be quite so "all-in" as Ballmer suggests: The company has plenty more chips on the table to use if its gamble with the new look Windows fails to deliver. Last year the company's revenues from operating system sales accounted for just 25 percent of its total sales, and almost half of that came from its enterprise licensing agreements which generate cash regardless of whether customers chooses to upgrade to Windows 8 or not. (That's probably just as well for Microsoft--only 4 percent of enterprises questioned in a recent Forrester survey have specific plans to deploy Windows 8 desktops in the next 12 months.)

Windows 8 First Impressions for CIOs and IT Pros

So however Windows 8 is received, Microsoft will be just fine financially. But what would the failure of Windows 8 really mean for the future of Windows? Could it spell the end for the Microsoft's client operating system business?

"Anything can fail and disappear," says Michael Cherry, an analyst at Directions on Microsoft. "Wang was once the big name in word processing but it has gone, and DEC is no longer around today," he points out. "Windows is used in so many places that it would take more than a single screw-up by Microsoft for Windows to disappear, but I wouldn't say that it could never happen."

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This Isn't Like Vista

Failure for Windows 8 would certainly have more far reaching consequences for Microsoft than did the failure of Windows Vista. When that operating system proved not to be the hit that the company had hoped, Microsoft simply moved swiftly on and released Windows 7, a stable and (relatively) secure operating system that is popular with consumers and, increasingly, enterprise customers.

But things are different this time around because Windows 8 is not just a new operating system for the desktop, but part of a whole new Windows 8 ecosystem that also includes operating systems for the increasingly important tablet computer market and for smartphones--all with the same tile-based user interface. That means it can't back away from the new desktop user interface without leaving its "one interface for all devices" strategy in tatters.

So Microsoft is apparently hitching its Windows desktop fortunes to a user interface which was originally designed for Windows Phone. And there's no getting around the fact that Windows Phone has spectacularly failed to impress thus far: IDC's Q3 2012 figures show Android was biggest selling phone operating system with 75 percent of the market, with iOS in second place with Apple in second place with just under 15 percent.

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