HP sticks thumb in Microsoft's eye, discounts consumer Windows 7 PCs

When sales are hard to come by, every little bit helps, says analyst

Hewlett-Packard today launched a new online promotion that discounts several consumer PCs by $150 when equipped with Windows 7, saying the four-year-old OS is "back by popular demand."

"The reality is that there are a lot of people who still want Windows 7," said Bob O'Donnell, chief analyst at Technalysis Research, in a Monday interview. "This is a twist, though, and may appeal to those who said, 'I do want a new PC, but I thought I couldn't get Windows 7.'"

HP has not discarded Windows 8.1 -- the perception-plagued dual-UI operating system -- nor resurrected Windows 7 from the crypt: The PC seller, like every other OEM (original equipment manufacturer) in Microsoft's orbit, has never stopped selling Windows 7.

But HP was the first major OEM -- it was the world's second-largest in the fourth quarter of 2013, according to research firm IDC -- to blatantly market Windows 7 PCs to consumers since Windows 8's first few months, said O'Donnell.

HP's selection of Windows 7 consumer-grade machines is small, just five models: Two notebooks and three desktops, with discounted prices starting at $480 and topping out at $1,000. By comparison, HP listed 68 different Windows 8 and Windows 8.1 laptop, desktop and hybrid models on its for-consumer website Monday.

On the business side, HP and others, including No. 1 Lenovo and No. 3 Dell, continue to market Windows 7-powered PCs first, Windows 8 and 8.1 systems second, recognizing that corporations will stick with the 2009 OS for years to come.

From O'Donnell's viewpoint, HP's move was not so much an admission that Windows 8 and 8.1 are flawed -- even though he argued they are -- but an attempt to grab sales wherever it can after a year when PC shipments plunged 10% and are projected to slide again in 2014. By IDC's estimate, HP's U.S. shipments fell 12.3% last quarter compared to the year prior, while Dell's and Lenovo's climbed 5.6% and 10.8%, respectively.

Dell and Lenovo rely much less on sales to consumers, who have declined to buy new PCs as they shift to tablets, than does HP.

The promotion reminded O'Donnell and others of the dark days of Windows Vista, when customers avoided Windows 7's predecessor and instead clamored for the older Windows XP on their new PCs. Then, customers who had heard mostly negative comments about Vista from friends, family and the media, decided they would rather work with the devil they knew rather than the new one they did not.

"It's not a perfect comparison," said O'Donnell, of equating Windows 8 with Vista, "but the perception of Windows 8 is negative. I said early on that Windows 8 could clearly be Vista Version 2, and that seems to have happened."

Others, both professional analysts and independent pundits, have linked Vista and Windows 8 on the flop-o-meter.

"But the timing of this seems a bit odd. I thought vendors might have done this last year," said O'Donnell

HP claimed that it was bringing back consumer PCs equipped with Windows 7 "by popular demand." (Image: Hewlett-Packard.)

A year ago, there was a larger price gap between touch- and non-touch-enabled PCs, and thus resistance, or at least apathy, to Windows 8. The gap has narrowed considerably since. "It's kind of ironic that HP is doing this now," O'Donnell said.

HP and other OEMs can continue to sell Windows 7-equipped PCs as long as Microsoft keeps selling them licenses. When it will halt those sales, however, is unclear.

The uncertainty stems from an incident last fall when Microsoft first set a deadline of Oct. 30, 2104, then retracted the cut-off, claiming a final end-of-sales date had not been determined.

Microsoft's practice has been to halt delivery of the previous Windows edition to OEMs two years after a new version launches. The company shipped Windows 8, Windows 7's replacement, in October 2012. The now-you-see-it-now-you-don't Oct. 30, 2014, date fit that policy.

If Microsoft later decides on a different OEM end-of-sales trigger, it would be the first departure from the practice, which the Redmond, Wash. company defined in 2010.

Even after Microsoft stops selling licenses, computer makers and their customers will still have ways to get Windows 7.

Windows 8 Pro and Windows 8.1 Pro include "downgrade" rights that allow PC owners to legally install an older OS. While customers must provide their own installation media, OEMs and system builders may also use downgrade rights to sell a Windows 8.1-licensed system, but factory-downgrade it to Windows 7 Professional before it ships.

Nor will enterprises with volume license agreements lose access to Windows 7, as they are granted perpetual downgrade rights as part of those agreements.

While Microsoft may not be completely happy with the Windows 7 push by HP -- especially with the OEM's line of "Featuring genuine Windows 7 Home Premium for a familiar and intuitive environment (emphasis added)," a backhand slap at Windows 8 -- a license sale is a license sale.

"The challenge of operating systems on legacy hardware is that people tend not to upgrade," said O'Donnell. "We've taught them that OS upgrades come on new hardware, and it's hard to break them of that."

Rather than buck the habit, HP's leveraging the negative perception of Windows 8 to its advantage by trying to tempt consumers who want to upgrade their PC but who do not want the new operating system.

"This will be interesting to watch play out," O'Donnell said, when asked whether others would follow HP's lead in touting Windows 7. "This won't dramatically change things, but the market needs every little bit of help it can get."

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is gkeizer@computerworld.com.

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Copyright © 2014 IDG Communications, Inc.

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