Will Windows 8 really matter?

By Preston Gralla

Microsoft is on track to deliver Windows 8 this year, likely some time in the last quarter. As always with new Windows releases, we can expect mega-hype and a blanketing of the airwaves, print, and Internet with countless millions of dollars in Microsoft marketing and advertising.

But this time around, there's a serious underlying question about the new Windows release: Will Windows 8 really matter? Will it change the way anyone works, plays, gets information, or interacts with others? How much will it matter to Microsoft's bottom line?

At one time, asking such a question would have been unthinkable, because Windows was the rock upon which Microsoft has always stood. It was not just the company's biggest money generator, but also its most iconic product. There was a time when the release of a new version of Windows was a cultural event. Back in the heady days of the release of Windows 95, Microsoft was said to have spent $300 million on the launch, including buying the rights to Rolling Stone's song "Start Me Up" for the product's theme song, draping a 300-foot tall Windows 95 banner over Toronto's CN Tower, and even releasing a video about how to use Windows 95 starring Friends' Jennifer Anniston and Matthew Perry.

Those days are long past for Microsoft. Only Apple now has enough cultural currency to make the release of a new product become a touchstone, as it does with each new version of the iPad or the iPhone.

But there are more important things for companies than hype and cultural relevance, notably the bottom line. And even in that way Windows 8 doesn't matter as much as earlier Windows versions. Microsoft's most recent earnings report show that the glory days of Windows are gone. For the quarter, the revenue for the Windows division dropped six percent compared to a year previous, the only one of Microsoft's major divisions to show a drop. It was only the third largest division in terms of revenue, with $4.74 billion, behind the Business Division (Office, Exchange, and Sharepoint) with $6.28 billion, and the Server & Tools Division (Windows Server, SQL Server, System Center) with $4.77 billion. If the Entertainment Division ($4.24 billion) continues its growth of 15% this quarter, and the Windows division continues to stagnate or drop, Windows will drop to the fourth largest division in the company.

This quarter wasn't an anomaly, because Windows revenue has dropped three of the last four quarters, and the one quarter it did grow was at only a 2% clip. As a result, Windows' share of Microsoft revenue dropped to 22.7% of the company's total, the lowest in two years.

So in terms of revenue, Windows 8 simply isn't nearly as important to Microsoft as new Windows releases were in the past. Because of the strength of its other divisions, Microsoft will continue to post strong earnings, no matter what happens to Windows.

For desktops and laptops, there isn't enough new in Windows 8, based on my look at the Developer Preview, to get many people to upgrade. It won't change the way people use their computers, or offer dramatic new capabilities. .

However, in one way, Windows 8 will be one of the most important Windows releases for Microsoft in years. It's Metro interface looks and works like Windows Phone 7, and has been clearly designed for tablets rather than PCs and laptops. It's an attempt to jump-start Microsoft's push into mobile, getting people used to working with Windows Phone 7, and being the operating system for its tablets.

So yes, Windows 8 does matter, but more for Microsoft's mobile future than for traditional desktops and laptops.

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