Have We Crossed the Windows Threshold?

On August 15, 2014 Mary Jo Foley published an article on ZDnet titled Microsoft to deliver Windows ‘Threshold’ tech preview around late September.

Subsequent to the release of Foley’s article, a lot of follow up articles were published on the same topic on familiar PC computing hardware blogs, including PCWorld, Computerworld, CNET and more.

But a core point of interest for most commentators, a rumored capability of this new Windows O/S to auto discover the computer hardware upon which it is running and to serve an optimized User Interface (UI) for it, popped up in the press months before Foley’s article was published.

This post is not a history lesson about rumored features of Microsoft’s next O/S, so it makes sense to take a moment to provide backdrop for why this topic is worth commenting about here.

Bottom line: “Windows Threshold”, and its capability to auto-sense hardware, promises to deliver substantial reductions in Cost of Goods Sold (COGS) for Microsoft. Satya Nadella, CEO, alluded to the promise of a reduced COGS based on one version of Windows for any/all hardware platforms during Microsoft’s most recent earnings conference call.

We assume our readers will be interested in any feature powerful enough to enable Microsoft to preserve gross margin, but still substantially reduce COGS. After all, without this feature Microsoft would continue to require separate versions of its O/S for different hardware platforms — Windows Phone, Surface, XBOX, and PC.

Back on April 2, 2014, in a video webcast of an interview between Charles Torre, a Senior Quality Engineering and Designer at Microsoft and Kevin Gallo, Director of Program Management, Windows Phone, Microsoft, mention was made of a “Universal App” process.

This webcast, titled What’s New for Windows and Windows Phone Developers, is devoted to a discussion of this new App development process, which Gallo defines as “an App designed to run across many different form factors, PC, tablets, Phones. The App adjusts itself so that the UI and the interfaces work across all of those different devices . . . ” (quoted from the webcast of Torre and Gallo’s discussion, which was held at Build 2014).

As we noted above, the big deal about this feature is the room it may provide to Microsoft, and to its OEMs, to offer consumers PCs at substantially lower cost, perhaps on par with the street price for typical examples of the Chromebook platform Google has developed and most prominent PC OEMs have opted to produce.

If this holiday season does provide the venue for a market debut for these lower cost computers, it may not be a stretch to see Microsoft reclaim some of the ground it appears to have lost to Chromebooks at the low end of the consumer PC computing market.

Disclaimer: I’m long Microsoft and have no position in Google as of the time of the publication of this post

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


Intel Raises Guidance, is it Safe to Say the PC Market is Revitalized?

On June 12, 2014, Intel® published a press release on its Investor Relations web site titled Intel Raises Second-Quarter and Full-Year Revenue and Gross Margin Expectations.

The first sentence of the release specifically noted “stronger than expected demand for business PCs”. The guidance towards an improved gross margin attributes the improvement to “mostly higher PC unit volume” as the principal driver. Confidence level seems high based on a tighter “plus or minus $300 million” than the $500 million range included in earlier guidance.

If PC sales are better than expected, is it also safe to assume tablet sales are taking the hit, and fickle tablet consumers are making their way back to PCs? This explanation doesn’t look reasonable. As Microsoft made clear in the Surface Pro 3 debut event, best of breed tablets have been consumed for different objectives than would be the case for PCs. Certainly there is a segment of the PC market consuming tablets, but the majority of these sales (and I should say I think Microsoft’s notion is accurate) have been to consumers looking for a great book reader, or a movie player, or, perhaps for other casual purposes.

Perhaps a more helpful reading of why PC sales are up has more to do with much better price/performance than was the case earlier this year, or even since the release of Windows 8.0. In June, 2014, it is quite possible for consumers to acquire quad core powered PCs and laptops at an under $500.00 price point. Market sentiment on the O/S running on most of these systems, Windows 8.1, is now more favorable, for example, a review of Windows 8.1 on the techradar.pro site carries the title “Major Update to Windows 8 goes a long way to solve some of its original shortcomings”.

While PCs running Windows 8.1 have become more appealing to consumers, resellers are also closely managing how consumers approach alternatives for serious business computing, meaning Google Chromebooks. A visit to BestBuy.com and a search for “Chromebook” landed the writer on a web page with a bold header at the top: “Is a Chromebook Right for You?”. The paragraph of information just below this heading emphasized how dependent this computing device is on the Cloud.

So is BestBuy on to something potentially even more important than Intel’s improved guidance? Is the consumer finally starting to feel anxious about cloud computing, in general? A change in consumer sentiment about cloud, and a new appreciation of the threat represented by online hacking, would certainly be a big deal.

Disclaimer: I’m long Intel and Microsoft, and neither have an investment in Google, nor in BestBuy

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved