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Updated Wednesday, December 5, 2012 at 11:16 AM

Microsoft-Intel tablet sales sputtering

By Dina Bass Ian King
Bloomberg News

A push by Microsoft and Intel to combat Apple’s iPad in the $63.2 billion tablet market is off to a slow start.

Of more than a dozen tablets Microsoft and Intel touted for the new version of Windows, only five can be bought for immediate U.S. delivery.

Early demand for Microsoft’s first computer, the Surface tablet, seems “disappointing,” said Craig Berger, an analyst at FBR Capital Markets. And computer makers have been hampered in introducing tablets by limits Microsoft imposed on which got a crack at prototypes, and by delays in Intel power-management software.

The holdup is making it harder for PC makers, already beleaguered by plummeting demand, to challenge Apple and Google during the holiday shopping season.

While PC variants running Windows abound, tablets built on ARM technology-based chips or low-power Intel processors are scarce.

“You can hardly even find one,” said Bob O’Donnell, an analyst at market researcher IDC in Framingham, Mass. “So even if you wanted to buy it, it would be difficult.”

The list of Windows tablets is short. In addition to Microsoft’s Surface, Asus’ Vivo Tab RT and Lenovo’s IdeaPad Yoga run the RT version of Windows and boast ARM-based chips. Samsung’s ATIV Smart PC and Acer’s Iconia run Windows 8 and rely on Intel chips.

Two of them, the Surface and the Acer device, are available only at Microsoft’s own stores, which number just more than 60 for the holidays. FBR’s Berger wrote in a note last week that Surface sales “have underwhelmed expectations.”

Microsoft has declined to comment on Surface sales, not a positive sign, said Wes Miller, an analyst at Kirkland-based Directions on Microsoft. “When Microsoft is stealthy about numbers, that usually means something,” he said.

At a September event, Intel said nine PC makers, including Dell and Hewlett-Packard, would have devices with its newest low-power chip on sale when Windows 8 was released in October. More than a month later, only four do. Of those, only two have products in the U.S., Intel said.

Days before Windows went on sale, Microsoft provided a list of five Windows RT devices it said would be available at the software’s release. Only two made it out of the gate, and Microsoft later said the list contained errors.

In a note to clients, Nomura analyst Rick Sherlund termed Windows 8’s release an “awkward launch, with PC vendors slow to bring out” new tablets and Ultrabook touch devices.

For the PC industry, Windows 8 and RT tablets and touch-screen laptops that convert to handhelds are an attempt to build a beachhead in the mobile business. The PC market is forecast to shrink this year for the first time in more than a decade.

Tablet shipments will pass notebooks in the second half of 2013, estimates Nomura analyst Eve Jung. NPD DisplaySearch projects the tablet market will hit $162 billion in 2017, more than double its size this year.

The PC market’s lack of momentum contrasts with the 43 percent jump in tablet shipments in the third quarter, according to Strategy Analytics.

Apple, before it introduced a new lineup of iPads, including the lower-cost iPad Mini, had 57 percent of the market in the period. Devices based on Google’s Android mobile operating system had 41 percent, and Microsoft Windows-based tablets had 1.6 percent of the global market.

“Windows doesn’t typically come screaming out of the gate, but it’s fair to say that Intel and Microsoft would have hoped for more,” said Alex Gauna, a San Francisco-based analyst at JMP Securities.

Microsoft CEO Steve Ballmer said at a shareholders meeting in Bellevue last week that the company is seeing “fantastic demand” for tablets and touch-screen PCs featuring Windows 8 and is working to get more into stores.

Microsoft declined to comment except to refer to comments from Windows CFO Tami Reller at a conference last week.

“There are some touch devices in retail today, and we’re working to get more touch devices out there,” Reller said. “But broadly speaking, there’s a lot of great devices that have come to market, some that have sold out, some that are now being replenished and coming to market, and more models to come.”


Damian Dovarganes / The Associated Press
Windows 8 tablets aren’t easy to find, and one analyst called initial demand for Microsoft’s Surface disappointing.




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