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The Schwartz Report

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Microsoft's Bleak Black Friday

Black Friday does not appear to have been kind to Microsoft, which is banking on robust sales of its new Surface RT, the hybrid tablet-PC launched last month, as well as devices offered by its OEM partners running Windows 8.

Well-respected Piper Jaffray senior research analyst Gene Munster and his team took to their annual ritual of hitting the Mall of America in Minneapolis, where they analyzed traffic at the Apple Store for eight hours for the fifth consecutive Black Friday. This year, the team also spent two hours observing traffic and buying patterns at the new Microsoft Store, which just happened to be across from the Apple Store.

Based on their time spent in both stores, here's what they observed:

  • Average traffic at the Microsoft Store was 47 percent less than the Apple Store.

  • On average, 3.5 items were purchased per hour at the Microsoft Store. However, all but two were Xbox gaming systems, compared with 17.2 items at the Apple Store.

  • No Surfaces were purchased during the two hours the analysts spent at the Microsoft Store.

  • The Apple store sold 11 iPads per hour (both the mini and full-sized iPad) compared with 14.8 last year on Black Friday, though the analysts believe the lack of supply of iPad minis may have contributed to the decline in sales.

  • Traffic at the Apple Store was up 31 percent over last year.

  • The projected growth for iPad sales year-to-year is 62 percent, with more sales moving online. 

Piper Jaffray wasn't the only one to report bad Black Friday news for the Surface RT and Windows 8. IBM's annual Digital Analytics Benchmark Black Friday Report found that 88.3 percent of all tablet and smartphone traffic was related to iPads. Granted, that doesn't necessarily reveal how much of that traffic resulted in purchases, but the item that came in second was the Barnes & Noble Nook at a mere 3.1 percent, followed by the Amazon Kindle at 2.4 percent and the Samsung Galaxy with just 1.8 percent of traffic (all based on some derivative of Google's Android). I was unable to ascertain from IBM's report whether it even measured the Surface or Windows 8-based systems; an e-mail and phone call to a spokesman went unanswered.

Store
A moderate crowd of shoppers at Roosevelt Field mall in Garden City, N.Y. gathered at Microsoft's holiday pop-up store examining the Surface RT. (Credit: Jeffrey Schwartz)

I didn't spend Black Friday conducting any deep analysis but I did stop in at my local Best Buy, which of course doesn't sell the Surface but did have various Windows 8 systems on display. Some of them, I was dismayed to see, weren't touch-enabled. The Windows 8 machines were overshadowed by Apple's one-day promotion in which the company was discounting its full-sized iPad, not the mini.

Days earlier, I was at the Roosevelt Field mall in Garden City, N.Y., where I visited one of Microsoft's holiday pop-up stores. Unlike it's permanent retail stores, this pop-up store was basically a stand which showcased the Surface and gave a small but barely noticeable amount of real-estate to a few Windows 8 PCs offered by OEMs.

The pop-up store was well-staffed and there were a number of people looking at the Surfaces. The rep behind the counter said the Surface machines were selling well but offered no specifics (however, what sales guy is going to tell a prospective customer that something isn't selling well?). I then strolled over to the Apple Store, which was quite jammed.

One bad day doesn't necessarily spell doom for the Surface and Windows 8 but it is the latest discouraging data point showing the new OS is going slow out of the gate. Just before the Thanksgiving holiday, Forrester Research issued a report concluding Windows 8 appears to be "dead on arrival" in the enterprise.

I got my own dose of that possible reality last month, when I was on a panel called Advances in Mobile Devices: Technologies, Products and Strategies at the Interop 2012 show in New York, where I polled the audience of enterprise IT pros about their support of tablets. I learned that, indeed, most were supporting iPads -- but hardly any had plans for Windows 8-based devices.

Is there any hope for Surface and Windows 8? In a September BusinessWeek article titled "Microsoft's Frantic Race for Third Place," which explored the company's other daunting challenge of making a dent in the smartphone market with Windows Phone 8, Microsoft senior marketing manager Greg Sullivan said, "Our road map for Windows Phone is measured in years, not months." Since Windows Phone 8 is tied to the fortunes of Windows 8, it raises the question: Does Microsoft have years to be successful? The article, which took a mostly pessimistic view toward the prospects for Windows Phone (though it did praise the unique interface), did conclude with some hope. It noted that in 2001, everyone gave Microsoft's Xbox little change of unseating Sony and Nintendo in the gaming market, while today it has a dominant 47 percent share.

Do you think Windows 8, Surface and Windows Phone will share a similar come-from-behind fate over time? Feel free to comment below, or drop me a line at jschwartz@1105media.com.

Posted by Jeffrey Schwartz on November 26, 2012 at 11:59 AM


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Reader Comments

Wed, Nov 28, 2012 Richard Rabins Burlington Ma

You have to look at the long game. As a result of the new mobile user experience, we are in the middle of the largest inflection point (in terms of numbers) in the history of computing. Apple is a tremendous company as measured by product quality and innovation.Google is destined to be a long term player and so is Microsoft. Windows 8 is simply too important for Microsoft to give up on. They have got a lot of things right with Windows 8 and its going to continue to evolve. I was skeptical of the Surface but I have to say that I have been surprised by it. It is a very credible product. I for one am not betting that Microsoft will be shut out. So what does this all mean. It means that developers are going to have to figure out how to cost effectively and rapidly build business applications that run on all these platforms and in all the size formats that Apple, Google and Microsoft are supporting. Richard Rabins www.alphasoftware.com

Tue, Nov 27, 2012 Taylor Minneapolis

This article is a reprint of the original article posted on CNET... And that article was a true piece of work. I'll just state the facts. I was at Mall of America on black Friday. There were lines in front of Microsoft and Apple... at midnight Microsoft opened. The line had to be let in 50 people at a time. The Apple store did not and everyone but three people realized Apple wasn't opening and left their spot in line. The Microsoft store was packed from midnight until 3 am. There were plenty of surfaces, pcs, Xbox's, and games being sold. Apple didn't open until 6 am. - this article was written by pure speculation and absolutely no factual info. Not to mention the analyst from Piper Jaffery, someone should have given some background info on this guy. Like which brand he's loyal to, which company he's done buco business with in the past, oh yeah and who's stock makes up his portfolio. Nothing like trying to line your pockets with frivolous media stories.

Tue, Nov 27, 2012

No ActiveDirectory integration on the Surface RT and no Outlook means no dice for the enterprise. I, like everyone else, am waiting on the Surface Pro before I cast my lot with Android once again. It's unfortunate that the Surface Pro could not be available during this critical sales period as that would probably stand a better chance than the RT version. The most damning piece for me was the lack of technical and enterprise knowledge of the Microsoft Store sales people. Obviously, I already knew the answer, but when I asked about ActiveDirectory and Outlook I had to be redirected to several different sales personnel until finally, I spoke to the manager of the store who actually knew the answer. Even worse was his condescending attitude - I was actually bothering him with questions related to how this device would work and be managed within my domain, Heaven Forbid! It wasn't until I told him that I am a Microsoft developer and that I am developing apps to submit to the App Store that he changed his tone - but at that point, the damage was done, and, if I were truly interested, I would not have purchased it there, I would have gone anywhere else, or online.

Tue, Nov 27, 2012

Uh, Notes wasn't a word processor.......If you believe the world is going to end Dec. 21st, wouldn't you be going on a spending spree NOW?

Mon, Nov 26, 2012 cdr STL

Win8... DOA thanks to Metro, and the obnoxious, unusable, ugly, and uncontrollable Start screen. Surface...pretty much useless thanks to WinRT, thus on life support. Hopefully it will survive until Pro is available. Then the excessive price will kill it.

Mon, Nov 26, 2012 Jim Paynw Dallas, TX

Not only was it two hours versus eight hours it was only at one location. It's hardly a credible analysis. Not to mention the fact that Apple has an established and well known physical store presence and in addition there are other channels where iPads and other tablets can be seen and purchased. When I bought my Surface a week ago I was waiting for someone else to complete their sale and I watched two others buy one after me. That same day I also visited an AT&T store near the Apple store and the MOD told me that they can't keep the Lumia 920 in stock. I was told that they didn’t have any in the store and that they run out in a couple of hours and have resorted to having the devices shipped directly to the customers which they never saw with the Lumia 900. More importantly they say no one is returning them. So, are my anecdotal single data points about Surface RT sales in Dallas and the Lumia 920 sales at one AT&T location as relevant as Gene Munster’s apples-to-oranges anecdotal analysis? It would seem like they are in the same ballpark. I often say that you can draw an infinite number of lines through one data point and Piper Jaffray’s is but one data point. What I’m more concerned about is that Pipe Jaffray has provided this one (biased) data point and now this is used to influence the broader market. With shoddy research like this by such an influential analyst group it’s no wonder people believed that buying a home in 2008 was a sure thing. Sure, it's going to be some tough slogging by Microsoft or any other competitor in this space and Microsoft certainly has the most to lose, but I claim we need to wait and see how things pan out over the next nine months or so. After all some people believe that the world ends on December 21st of this year and maybe they’re just holding off on making any purchases until after then. ;-) Ha!

Mon, Nov 26, 2012 Ed Colorado

Giving them 2 hours of measurement time seems exceptionally generous, and I don't see what your objection is since the transaction rates were measured in units per hour. Right now Windows 8 RT is only a legend in Microsoft's mind. Maybe when they pass 1% market share they deserve to be tracked more closely.

Mon, Nov 26, 2012 Ed McNamara Somerset, N.J.

I don't think you can lump predictions on the future success of Windows 8 operating system software with the future success of Microsoft hardware devices and phones. They are not necessarily tied together. The operating system of tens of millions of desktops/devices are covered under Software Assurance (SA, aka "maintenance") for 2-3 years to come. When companies roll out hardware upgrades to those end-users, new installs of Windows 8 is what will ship on those products. Whether or not those DEVICES are made by Microsoft is the real question. But the software will most certainly be Windows 8.

Mon, Nov 26, 2012 JammasterJ72 Orange County, CA

Ok here goes....while I may be considered to be a loyalist to the Microsoft side of things...I am also a tekkie that works in the IT world and here is my two cent take on this article. One: Apple has an established track history of selling the public quality goods and has been working the Ipad consumer market for years now. Hardly surprising its a cool device with many kick *ss features and a major Appstore offering tons of titles. The reality is that for the time being Apple is basking in the light of genius forward thinking and has captured the market up until now. Here are some of my reasons why Microsoft will catch up soon. Does anyone remember Lotus Notes ...which was top dog of word processing software back in late 80's & early 90's...enter MS Office....and left Lotus in the dust...Windows OS scoffed at first...now written in eternal history books as the champion OS for the budding digital age....the massively popular and entrenched Novell OS gave way to Windows Server NT and Server 2000....my point is this Microsoft has always....I mean always...poured enough resources to overtake a current market share "giant" and will do so again with the tablet, phone and OS platform. The best case for this is the reality that some folks are simply waiting to see how all this will impact the business communities and then the Microsoft consumer base will begin the adoption which will become the norm as people begin to see the inherent value in the features the entire "8" platform can bring to the table especially in the Enterprise as sys admins notice convenience in securing all these new gadgets and devices that their users bring to work. In a world of something new and awesome being pounded into your head every 14 seconds there are a number of choices for everyone to enjoy and select as their "daily driver" device and Microsoft's recent foray into this new 3.0 world will rise to be a contender for the race to the top a little slower than if this was even 3 years ago for sure as the sheer volume of new crap sway people's choices. I say sometimes its actually best to lead development into the uncharted paths the future holds instead of simply doing "whatever those other guys are doing" like all the rest of the vendors out there....This difference is how I see Microsoft currently....innovating and distinguishing themselves as leaders for the next wave of computing and communication. Thank you and yes I am a Microsoft Partner...and Apple product user....duh..I mean.have you seen these awesome things... Truly remarkable!

Mon, Nov 26, 2012 B.Rey Topeka,Ks

With the shear number of Desktops needing upgrading Microsoft could easily dominate the market with Win8 if they would just look at the Market. As with Win7, MS grossly overpriced the new OS immediately snubbing large groups of users. I Like many have multiple devices in my household and paying 60 or 80 per is immediately out of reach. With the number of MS OS devices out their, MS could easily offer household pckgs or reduce their price to $20 per seat and still make more money as millions of users fianally upgrade from XP.

Mon, Nov 26, 2012 K

Come on, 8 hours observation vs 2? There's a disparity in measurement from the get go.

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